The False GDP of USA

April 27, 2009 by: forexwatch

Tun Dr Mahathir bin Mohamad wrote in his Weblog about The Banking System and The Fasle Economy.

This is the second installment in a series on the trends that led to the present financial crisis.

1. Another contributor towards the per capita and GDP of the rich countries is the banking business.

2. Banks are apparently allowed to lend more money than they have, sometimes as much as ten times more. When they lend this money which they do not have, it became their asset on which interest can be earned.

3. Effectively they are creating money and earning profits from the money they have created.

4. Real businesses cannot do this. They cannot sell what they don’t have nor earn income from services they don’t provide. Doing business is therefore far less lucrative than banking. If the per capita and GDP excludes bank earnings then they should not be as high as is shown.

5. Because banks can lend more money than they have, the tendency is to lend as much as possible. In many rich countries banks offer to lend even when the clients are unable to pay.

6. If the banks lend 10 times more than the money they have then their profit must exceed the sum they would expect if they lend only the money they have from capital and deposits.

7. This extra money they earn is not real because it is “created” by the bank out of thin air. Nevertheless the profits earned from this money would be part of the banks profits and therefore the dividends for the shareholders. In the end they would contribute to the per capita income and GDP.

8. Banks also issue credit cards. The credit card holders expend far more than the money they have with the banks. The excess money is regarded by the banks as loans which may be charged a hefty interest of up to 18 per cent.

By Tun Dr Mahathir bin Mohamad, the former Prime Minister of Malaysia
Read More at Che Det WebLog

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11 Responses to “The False GDP of USA”
  1. weight loss pills (1 comments.) says:

    Higher than Clinton’s. And most government spending is on social services, which keeps expanding.

    Clinton had a fake good economy and Clinton left with a recession. Greenspan had to cut interest rates. Clinton was lucky the internet bubble happened when he was in office. The internet bubble pumped trillions of foreign dollars into the economy, which increased government tax revenue.

  2. thai bar (1 comments.) says:

    Ive been trading the pointbreak and fractalwizard EA’s for a while, getting great results. This is useful background information for me, thanks!

  3. 10 hot holiday toys (2 comments.) says:

    Good stuff you wrote. *sigh*

  4. Online Payday Loans (1 comments.) says:

    Nice gig. How do I get on this?

  5. forexwatch says:

    Thank You.

  6. forexwatch says:

    How do you get what, please?

  7. forex MT4 trader (1 comments.) says:

    Money made from other peoples money? what is money anyway… It must equal value, or there is someone else to pay the price. This is forex, a zero-sum game, one person/entity wins, another loses.

  8. Jim (1 comments.) says:

    Good reading, im trying to select a trading robot, or decide whether to stay with the manual trading approach.

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