Economics is to keep you a dummy
For kindergarteners and PhDs
What do you call someone who makes a living by making up words?
A banker.
Central banks can only do two things. Print money or burn money. Not complicated. Inflation happens, when you print money. Duh!
So bankers hide behind big words. If they want to print money fast, they will say “low interest rates”. If they want to print money slowly, they will say “high interest rates”. If they just want to print money outright, they will call it “quantitative easing”. And when they are finally forced to burn money because of high inflation, they call it “quantitative tightening”. Get the picture?
Monetary policy is central bank policy. Fiscal policy is central government budget.
Most history classes don’t discuss central bank policy, because they don’t understand it. This is how banks run countries. Through the shadows.
Ask yourself… when was the last time a politician criticized the Federal Reserve? They usually don’t, because they don’t know how the scam works.
Boom and bust (also called KABOOM)
Once you understand that all money is printed via loans, things make so much more sense.
All money is printed via loans. All. Of. It. Mortgages, auto loans, student loans, credit card debt, payday loans. They all originate at the Federal Reserve.
That’s the key to opening your eyes. Easy debt increases demand (artificially). It’s fake demand. This is why easy debt increases inflation. When debt is cheap, everyone is getting it to buy a house. That increases demand. That increases prices.
That creates a bubble. The bubble pops, when people are so overloaded with debt, they can’t pay back their loans. This is why crashes happen. When people are forced to sell to pay their debts. “Liquidity crisis” is when people can’t pay back their debts.
They use “liquidity crisis” for all sorts of screw-ups. When a country defaults on its loans. Or when the bank runs out of money for withdrawals. Because guess what your bank is doing with your savings. It’s making ‘investments’. Yeah, right. Wink, wink.
In the boom phase of artificial demand, everything grows. And in the bust phase, everything pops.
GDP is the size of your country’s economy. When things are booming, the GDP goes up. When things are busting, GDP goes down. But it’s all fake. Why? Because the numbers are inflated. Don’t believe me? Look at the rates of GDP adjusted for inflation. That’s called “real GDP”. It doesn’t even beat 2% growth rates.
Speaking of GDP, what’s the difference between GDP and GNP? They are virtually identical. Twins with a minor tweak. Look at it from the American perspective. If an American company is making products in India, those products are included in GNP but not GDP. But if a foreign company is making products in America, those products are included in GDP, but not GNP.
Debt trapping countries
Everyone gets debt trapped. Not just your neighbor. Entire countries too. Entire countries like Pakistan. Uncle Sam and Uncle Zhang are running the same table.
This is how they play their little game.
Macroeconomics is economics for countries. There are exports and imports. When exports are more than imports, countries thrive. Duh!
When imports are more than exports, their leaders call it an “account deficit”. When a country can’t pay for imports, they have to print money to pay it. Or they go into debt to foreign countries.
When a country can’t pay the interest on its loans, they have two choices. Get another loan or default. If they get another loan, they are debt-trapped. When they want to debt-trap countries, they will say “deferred payment”. It’s a fancy way of saying, “We know you don’t have the money, just pay us back later with 4% interest”.
Wait till I tell you what microeconomics is. It’s when you can’t pay your home bills, dummy!
Vocabulary to keep you a dummy
There are three major types of investments. Stocks, debts, or houses. But I want to sound smart, so I’ll say the same thing in fancy words — equities, securities, and real estate. See their game? If everyone understood their game, they wouldn’t have jobs.
Just like a doctor who sells you heroin as oxycodone prescriptions. Why have tattooed drug dealers when you can dress people up with white coats? That’s Wall Street. Thugs who wear ties.
They use terms like “equity” to say stocks. When they use debt to make investments, they call it “leverage”. And the people who use “leverage” are called “hedge funds”. When they get a giant loan to buy another company, they call that a “leveraged buyout”.
When a stock bottoms, they call that “capitulation”. And when they want to tie you to monthly debt payments for 30 years, they say your loan has been “amortized” for 30 years. What a fabulous name for scheduling payments.
They should call it — slave payments. Or better yet, payments till you die.
Wait a minute. "Mort" means "death". "Gage" means "pledge". Mortgage. The French did know something.
Fancy ways to gamble
When rich people gamble on stock prices, they call that “options trading”. Every bet has to be backed with money as collateral. That money is called a “margin”. And when the bet is losing, it has to be backed with more money. That’s called a “margin call”.
Who has heard of “credit default swaps”? This is a fancy way of Wall Street saying they are gambling whether people will default on their credit or not! I mean, we gamble on everything. Why not this, too? Props to Wall Street creativity.
For example, Timmy got a mortgage of $300,000. Goldman the banker thinks he will default. He offers to pay Morgan $1000 a month. But if Timmy defaults, Morgan pays Goldman $300,000! That’s actually one of the reasons behind the 2008 crash. Because Morgan didn’t have $300,000 when everyone defaulted!
A lot like insurance by the way. Yup, when you pay car insurance, you are really just gambling that you will get into a car crash, and the insurance company is gambling you won’t crash. They got bonafide idiots like you, gambling against yourself.
When you get insurance, you are making a bet. For example, say you pay $100/month for life insurance. You are betting you will die before 80. The insurance company is betting you will die after 80. That’s what it boils down to.
Selling loans
They use “mortgage-backed securities” to talk about the ‘profit’ that comes from banks selling mortgages to people. Federal Reserve lends to Bank of America which lends to Timmy as a mortgage. The ‘profit’ from that transaction is collected via interest. And they call that a “mortgage-backed security”.
Why do they call it a security, then? Why not just call it a mortgage? Securitization began in the 1970s. They call it securities when banks bundle several mortgages together, and sell those loans to other banks. All they are doing is selling their loan contracts. Instead of Timmy paying back Bank of America, he now pays Citigroup.
Another name for “mortgage-backed securities” is “collateralized debt obligations”. And I am sure they will make up more words for the same garbage.
What’s Freddie Mac?
Say I am Rocket Bank. Rocket Bank has $10 million.
Now if I lend money for 20 mortgages, I run out of my money. Now what?
I can't wait 30 years for Jackie to pay back her mortgage.
So Rocket sells its loan to Freddie Mac. In return, Freddie Mac gives Rocket a payment. Rocket takes that money and gets Timmy hooked on a mortgage. Rinse, repeat. That's the mortgage industry. That's how they profit from riba.
And guess who backs Freddie Mac... your Federal Reserve. Printing dollars out of nowhere. In exchange for riba.
That’s the real reason for inflation in America. If you print more dollars, your money becomes worthless. Duh!
Unfortunately, virtually every “Islamic” loan does the exact same thing as Rocket. Including Guidance Residential.
“We are in a recession, stupid!”
And what happens when Timmy loses his job? They call that a “recession”. That’s when the debt bubble pops. Timmy lost his job, so he can’t pay back his loans.
Recessions happen because people can’t pay back their debts. Not complicated.
Unemployment is supposed to be less than 6%. They call it a bad recession when unemployment hovers at 10%. And when things get really bad — unemployment at 25% — they call that a depression. Like the Great Depression.
What do they call it when unemployment is high and inflation is high? Well, then you are really trapped. They call that “stagflation”. How do you get out of stagflation? You burn money. That’s the only way out. You have to save your currency, or your currency ends up like Zimbabwe.
You will see signs of recession in this order:
Hiring freezes
Cutting contractors
No more bonuses
Layoffs (fancy word for fired!)
When companies start firing people, their profits start going up again. That’s why stocks start are rising as unemployment is peaking. They have already bottomed a few months before unemployment peaks.
Before Timmy declares bankruptcy, Timmy says “I am ensnared, no matter what.” Timmy maxes out his credit card loans to pay one more month’s rent, before he goes homeless. Then he declares bankruptcy. That’s why credit card debt always peaks during recessions.
How to steal money
All the fake companies that were living debt payment to debt payment get wiped out in a recession. They can’t get easy debt anymore. But that doesn’t matter to their CEOs. They paid themselves nice bonuses and salaries. They knew the company had no chance. These zombie companies go bankrupt. That’s a good thing, of course. Sucks this “efficient” economic system printed money for incompetent thieves.
That’s not the only way to steal money. There is other vernacular. You buy a good company. You make it get loans to pay you. They call that “dividend recapitalization”. This is how “private equity” make their money.
Wait a minute, why do they call it private equity? Public equity is when anyone can invest via stock market. Private equity is when the investments are done behind closed doors.
What’s the solution?
The solution is a gold-backed currency. The solution is more exports than imports. The solution is preventing monopolies from forming. Competition keeps prices and corruption in check.
Most importantly, the solution is getting rid of usury in society. Debts fuel the worst aspects of society. People buy what they don’t need. Wastefulness. Egos. Materialism. Greed. And oh yeah, inflation.
Congratulations, you just got an economics degree. Now make up more words, and you just might win a Nobel Prize.
This is part of my series on Interest Free Zone: All of the Sahih hadith related to riba, A study of weak hadith on riba, Defining riba, A detailed breakdown on why Islamic mortgages are backdoor riba, Do credit card rewards programs have riba?, Madness on options riba
Related, I have a Riba and Ruin series: Economics is to keep you a dummy, What happened to SVB?, Ward of the State, First Republic: A tale of a fake bank & a fake auction, Hush, hush, a small bank goes poof
Related, I have a Selling Islam series: Salaried Shaykhs, Can paid Shaykhs make mistakes?
Haha , well written - loved the style and explanations.
Only some parts were difficult to understand.
I am honored to have "earned" my degree so quickly :)