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View Diary: What Are Derivatives? And what makes some of them Toxic? (36 comments)

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  •  A reason this is not being addressed (0+ / 0-)

    We've heard a great deal of all this cash the banks and corporations are sitting on and refusing to put back into the economy. Unfortunately this creates the images of vaults full of cash stuffed into cardboard boxes just collecting dust. Such is not the case.

    That money does not exist as cash but as electronic sums on electronic ledgers. It can only exist by being recorded on a specific ledger. It must be recorded as being in a bank, fund, or tied to a specific security of some sort. And the money must be working in some way, earning something.

    Much of that money, if not most, is probably currently listed in US treasury ledgers where it is about as safe as it can be and earning its owners a nice 2 - 4% annual return. This is the reason we should not be looking to Washington for a quick solution to the problem. Banks and industry have huge amounts of money and Washington just happens to need huge amounts of money at the lowest cost it can manage. It is currently a synergistic relationship and benefits both. Private money gets safety and interest, and the Treasury can borrow almost unlimited funds at the lowest rates anyone ever imagined.

    Any effort that puts that money back to work in any form other than US government debt causes lots of problems for Washington.

    Improvement is change. Not all change is improvement.

    by ricklewsive on Sun Oct 09, 2011 at 08:09:23 AM PDT

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