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1:49 Free Market System
5:44 Fractional Reserve Lending
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#BankLending #Recession…(read more)
BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
Title: Every Time Banks Do This, a Recession Happens
Introduction:
Banks play a critical role in the stability and functioning of the economy. However, their actions can sometimes contribute to economic downturns, leading to recessions. While banks are primarily responsible for safeguarding people’s money and facilitating financial transactions, there are specific practices that, historically, have proven to be precursors to recessionary periods. This article explores some of these practices and their potential consequences.
1. Excessive Risk-Taking:
One recurring trend seen prior to recessions is banks engaging in excessive risk-taking behavior. In pursuit of higher profits, banks may lend money to individuals or institutions with subpar creditworthiness. These “risky loans” carry a higher likelihood of default, eventually leading to credit market instability and subsequent financial crises.
The global financial crisis of 2008 is a vivid example of this behavior, where banks excessively loaned money to borrowers with weak financial standing. When the housing bubble burst, this cascade of defaults fueled a severe recession, nationally and globally.
2. Loose Monetary Policy:
Another factor that can contribute to recessions is a central bank’s loose monetary policy. When a central bank lowers interest rates to encourage borrowing and boost economic activity, it can create an environment of easy credit. This ease of obtaining loans can lead to increased borrowing and excessive spending on assets such as real estate or stocks.
However, when this credit-fueled growth becomes unsustainable, a correction occurs, resulting in a recession. The dot-com bubble in the early 2000s and subsequent recession is an example of the consequences of loose monetary policy that led to speculative market investments and ultimately an economic downturn.
3. Lack of Adequate Regulation:
Insufficient regulation or inadequate oversight of financial institutions can also contribute to recessions. When banks operate without proper checks and balances, they may engage in fraudulent activities, pursue excessive risk-taking, or allocate funds inefficiently. These practices can undermine the stability of the financial system, causing severe disruptions and recessions.
The collapse of Lehman Brothers in 2008 and subsequent financial crisis shed light on the consequences of weak regulatory oversight. The lack of strict regulations within the financial industry allowed for the proliferation of risky financial products, contributing to the systemic failure and a severe recession.
Conclusion:
While banks are vital to economic growth, their actions can sometimes lead to recessions. Excessive risk-taking, loose monetary policies, and a lack of adequate regulation all contribute to the vulnerability of the financial system. Recognizing these precursors to recession is crucial for policymakers, regulators, and individuals alike, as it enables the implementation of appropriate measures to mitigate the impact on the broader economy.
Balancing the pursuit of profit with responsible lending practices, ensuring regulatory principles keep pace with evolving financial markets, and maintaining prudent monetary policies are vital to prevent the recurrence of recessions. By understanding and learning from historical lessons, the banking sector can play a more stable and positive role in fostering economic growth while minimizing the risks of future recessions.
Looking at the positive side, every recession brings an equal opportunity in the financial market for those who are well-informed and prepared. I've come across stories of people accumulating up to seven-figure sums during such periods, and even achieving success in a favorable economy. As a baby boomer, I honestly believe that I would require guidance to attain such a significant amount for retirement. We should certainly find a way to benefit from this situation and make the most of it.
Society does not need bread lol
So in effect the Fed operates like a ponzi scheme and eventually the economy will collapse in on itself and then people will have to start out again.
We can see that playing out in South American countries, Lebanon and Sri Lanka.
Already left New York.
The current market/economy is unnecessarily tougher for boomers/senior citizens, I’m used to just buying and holding assets which doesn’t seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I’m really worried about survival after retirement.
excellent video!
Simple Home Equity Loan. Credit union wanted a call on demand clause, which is absurd for a secured loan, high credit, stable employment. The game is to force refinancing at an even higher, more absurd interest rate. That says something scary about their outlook.
Banks were either DUMB during the easy zero interest lending years or were smart and not give TONS of bad debt to bad credit clients and minimized risk!
It's quite simple why rates are climbing with rising imports and falling exports, the FED is obviously to be blamed for banking crisis. Something will eventually break if they keep the quantitative tightening and higher interest rates. Is this really a good time to have some savings in stocks?
You cannot cut your way out of recession you've got to invest your way out of recession, the Conservative party are in the dark ages on policy they've got to think again. My primary concern is how to maximize my savings/retirement fund of about £170k which has been sitting duck since forever with zero to no gains.
Ok smartassas
Fallacious (fraudulent) statement that tge recent interest rate rise 'shows rates are likely to rise for another 40 years.'
Why discredit your credibility and an otherwise good vid?
Is money not created by commercial banks when they lend money? I thought new money was created by commercial banks making loans just as much as the central banks making loans.
There is absolutely no way we are going to have high interest rates for the next even 10 years. We will see rates coming down by mid next year.
What’s fun to think about is that the Federal Reserve could have pushed lenders to heavily tighten lending standards at the very beginning of it the inflation. Raising interest rates was not necessarily to do at all to accomplish this.
No president since McKinley has been re-elected when there has been a recession in the previous 2 years….
Time for plan ₿
Crystal clear content…