Boom & Bust

Tarek El-Diwany so convincingly demonstrated that boom & bust is an outcome of interest based money - banking. But people are being led to believe that the cause is something different e.g. Financial Times Blog "The Future of Capitalism" is full of such stories. Why people don't understand which is so obvious? May be because of ignorance or because of deceit by who are the beneficiaries - bankers, brokers, investors. 


Here is an excerpt from "The Debt Economy" that throws some light on the current financial crisis "John Kenneth Galbraith wrote that all financial crises are the result of “debt that, in one fashion or another, has become dangerously out of scale.” The recent financial crisis was no exception, with everyone—homeowners, private-equity investors, our biggest banks—taking on enormous amounts of debt. If it’s frustrating that the government is footing the bill to clean up the mess, it’s even worse that the government helped pay for the debt binge that created the mess in the first place, thanks to a tax system that actually subsidizes borrowing. Debt didn’t get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked."


Here is another link that searched for the cause of current financial disaster "Genesis of the debt disaster - In the 1990s, a young team at Wall Street investment bank JP Morgan pioneered a new way of making money – credit derivatives. Within a decade, the market for these exotic securities had exploded to more than $12,000bn – and some people later blamed them for fuelling the global financial fiasco. In the first of two extracts from her book, Fool’s Gold, the FT’s Gillian Tett reveals how the innovation genie was first let out of the bottle – and eventually devoured the system, to the horror of its creators."