Stress test mess

Tomorrow we will hear that the big banks lack the capital to survive a prolonged recession as the stress test report is released. Of course the same banks such as Citi and Bank of Failmerica reported that they had a profit not but a few weeks ago. How is it that banks can not make money with FDIC insurance and centralized banking? The easy answer is that the leveraging is beyond ridiculous. Ratios as high as 50:1 exist where for each dollar that is in a bank 50 are in various investments through margin accounts and so on.

Banking has historically been one of the easiest businesses to succeed in, with great families such as the Medicis and the Rothschilds amassing enormous fortunes that gave them control of nations. In the New World, however, banking was more of a wild frontier, with so called Wildcat banking in the West. With these banks, like the modern day grifters, they leveraged highly in order to make a huge profit. Of course this only worked so long as deposits kept coming in to cover withdrawals and no run occurred. Since they offered deposits which had no gold backing them, the likelihood of losing all of one's wealth was high. However, as history has shown through episodes such as the Tulip Madness, people will blindly follow crowds who promise riches. After panics in 1837, 1873, 1893, 1896, 1929 people still do not understand the need for financially conservative practices. Yawn