The world banking system sham
My international travel during the ongoing financial crisis gives me some objectivity regarding our system and current way of life.
Everything we are doing and have done to generate growth in recent years is based on DEBT. Private institutions, Banks, have simply been 'printing' money to finance the debt. The collapse of the world banking system has been predicted for several years. But no one heeded the warnings.
Throughout history, banks were supposed to be places where people put money IN to safeguard it; the image of a secure vault. But today, banks make money through lending money, not storing it. Imagine if Bank of America was called 'Money Lender of America' – which is really what it is. Somehow, the image has been swapped.
The sham is that banks do not actually have the money they loan. They simply create money.
Here is some simple theory: banks are allowed to lend much more money than their actual capital through 'leverage' – high debt/equity ratios – to increase returns. In good times, high leverage is a great way to make huge profits with very little capital.
Bank regulations limit maximum leverage to something like 5 or 10:1. But some banks had much higher leverage at mid-month, sometimes 45 or 50:1, lowering this at month-end to satisfy regulators. They thought they were being 'clever'. The government sponsored mortgage giants Freddie and Fannie were using leverage closer to 100 to 1.
In bad times, even small losses on a highly leveraged portfolio can cause insolvency. On top of this, due to trading losses banks’ capital is reduced. Unless they increase their leverage even further (against Govt. regulations) they become insolvent (go bust).
The plan behind recapitalising banks, rather than buying up their bad assets, is for the government to buy preferred shares to restore the banks’ capital as a means to improve leverage. Key question: if the Government is 'printing' money, why do they need banks as intermediaries? Actually, they do not. But that is the 'system'.
One wonders when the system will 'break' – or perhaps the current financial crisis is evidence that breakage has begun. While politicians continue to claim that recovery will come, no one, anywhere, knows when things will bottom out.
ISA goes international
In October 2008, society delegates voted overwhelmingly to change the name of ISA to International Society of Automation. This name signifies that ISA is now focused on the broader aspects of 'automation' and aims to be a catalyst for creation and promotion of the automation profession of the future, marketing the society’s core competencies to automation professionals around the world. In a global market environment, international growth is vital to the future success of ISA.
Today, one can sense a spirit of new drive and determination within the ISA organisation to make it much more than it has been for several years. In addition to strong volunteer leadership, the existing team of dedicated people with years of industry knowledge and experience has been expanded to generate new growth through several focused objectives.
Tim Feldman, director of global operations, is working to transform ISA into a global organisation. Feldman travels the world holding meetings in key markets with suppliers, end-users, integrators, government officials, and academia to assess needs and review potential business partners who can deliver ISA’s core competencies to the automation profession.
No other organisation anywhere in the world covers these important functions to serve the global automation business. Stimulated and rejuvenated by its new name, ISA expects and intends to expand world membership and become truly international.
Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, JimPinto.com eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment, and industrial automation with a slant towards technology trends.
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