How does the financial system work? Why is it in trouble?

According to some the financial world plays the role of an inquisitor. Inquisitors were officials of the Roman Catholic Church during the 1400’s who tortured and sometimes killed heretics, usually innocent people they considered untrue Christians. Inquisitors were feared and famous for their brutality and torturing methods. Many people think bankers and people involved in the financial system are cruel, blood thirsty, ambitious inquisitors. According to them, loans from foreign banks only have one goal, keep Latin Americans poor and underdeveloped. For many, loans are part of a grand scheme or plan to keep us down and make our lives miserable.  One key contributor to this idea is Uruguayan writer Eduardo Galeano.  He is a marxist-leninist writer that believes the financial system was designed by the US government, and corporations in order to keep third world countries poor.  Galeano’s ideas have been very popular in the Latin American intellectual community since the 1960’s.

The problem is, most people do not understand what loans are, how they work, and where the money for these loans comes from. People like Galeano fail to understand the fact these loans are nothing but the hard work and savings of millions of people who have spent less than what they have earned. When people work, save and invest, they do not do it to keep people poor , but to gain profits which will translate in a better standard of living for them and their families. I have posted here a short video on saving, to show you saving is not an evil concept but a much needed value in society; value by the way, most Latin Americans do not possess.

Our governments and our banks get money from the financial institutions that have to pay interests to millions of people that have deposited money. Remember, banks do not make money by keeping money in their vaults. In order to pay interests or APYs and make a profit, banks loan money to people, governments and businesses that need it. Watch this short video on borrowing money.

In other words banks do not loan money because they are good and want to help the poor and downtrodden, but they do not loan money because they are evil and want to impoverish us either. Galeano’s philosophy seems medieval. Remember, during the Middle Ages it was sinful to loan money for an interest. According to the Christian Medieval Church, a true Christian would never loan money and expect to make a profit. That was simply inmoral!

Now just because, banks provide a great service, it does not mean they do not abuse the system. Right now, the world is going through a crisis created (IN PART but not only) by bankers. Much to blame is Bill Clinton(liberal center left) and a Republican(center right or conservatives) held US Congress. In order to become popular with voters they decided to “help” the poor and give them(the poor) easy access to loans. The problem was many of them(the poor) should not have qualified or obtained these loans because realistically they could not pay them back! The old saying “the road to hell is surrounded by good intentions” could not be more true. Watch this short video about the financial crisis. In three short minutes explains it really well! Follow the link.

Reply to this blog, by agreeing or diagreeing with Galeano. What do you think about the financial system. What could be done to avoid another crisis.


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