Wednesday, 29 February 2012

Money For Nothing - Part 1. Guest Post

A guest post from John Souter.
Banking, Money Creation and, The Privatization of Democracy.

Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. (Josiah Stamp, former Director of the Bank of England)”

Confucius is reputed to have said “Every journey begins with a single step.”

As a statement of logic it’s hard to dispute in physical terms but in the terms of thought and process surely the image of purpose and profit must precede that first step ever being made. And if and when it is made, we move our horizons further which, in turn, can change our perspectives and either encourage us to continue or decide to stop the adventure. At the base level this is how our life-term on this planet pans out.

Sure there are the quixotic variables – the chances of birth, filing cabinet drug den, mansion or penurious shanty – whether we inherit and find love, health and a degree of contentment or struggle to find reason beyond breath as to why we are here at all. In essence, I suspect for most of us, we experience most of these situations in individually varying degrees throughout life. It’s difficult, given the natural necessity – in fact gift – of our individuality to imagine or even strive for it to be any different.

Generally my thinking runs along the lines of the earth gives us our nature while the world is what we make of it and in doing so creates our nurture. You may or may not have noticed in the previous paragraph the ‘wealth’ factor wasn’t included. I have two reasons for the exclusion. The first is that wealth has an infinite number of values. Gifts of talent, vocational commitment, creative or analytical thinking, the discipline of compassion, to name only a few are all commodities in the basket of wealth; time and circumstance may attach chance and costs to them but, initially at any rate, they all come free.

My second reason is more mundane, as is the commodity that represents it; it’s money wealth. And considering the impact and influence this has on all our lives it may come as a surprise to most to learn, for a lucky few this comes free as well. For emphasis can I say that again, the lucky few get their money for nothing and build their fortunes and power towers on nothing more than their strength of conviction that they have a right to it. The ‘They’ call it confidence and any failing or threat to that confidence they call contagion.

In case you’re wondering, I’m not going into a long analysis of esoteric banking, brokerage or finance, primarily because it’s all waffle designed to confuse and conflate a commodity that has no legitimate purpose other than a means of exchange for services or products rendered, than to inflate itself into something that can sustain the world when in fact under the present model of exploitation it threatens to destroy it.

Where other commodities supplied by the earth are restrained by their quantity and availability money has none. It’s portrayed as a magic elixir that has no known boundary, demands only ‘interest’ as a tithe; and growth from all the other commodities, including the ‘people’ commodity. Until such time as its acolytes doubt the wisdom of their faith and their confidence wavers and they retrench to protect their ‘investments’ and minimise the impact on their interest.

For any normal productive or service business that may be reasonable behaviour given the vagaries of trade but is it reasonable for a business who claimed it had a infinite resource and acted accordingly?

At the risk of being boring here are some figures for you the chew on –

According to The World Bank the gross product of the world for 2010 was $63.5 trillion. Around $36 trillion of that was in financial (speculative) products.

In 1990 the related figure for world GDP was $20 trillion.

For 2010 the Bank of International Settlements (this is a ‘bank’ that handles all the speculative stuff like derivatives) record a turnover for the year at over $700 trillion.

What are derivatives? Well mostly they are a bet against a commodity, including a financial commodity, the punters don’t own but they bet against the price of the commodity going up, down but mostly round and round. So it’s a bit like betting on a horse with the added incentive of the race is continuous, with winners declared on the first past the post on every circuit until the last horse dies.

The financial worlds warning on this goes –“Derivatives massively leverage debt in a economy.” Which doesn’t mean much when the most of the money supply is based on debt and 60% of that is used to fund gambling. Now you know why Greece is in the trouble it’s in and why the EU is turning the screws on the €130 bn bailout in order to ensure the money is only used to pay off some of the debt its already in.

But the biggest waste in all this is not the Monopoly/electronic money game, it’s the waste of human assets. Not only of those who suffer under the jack-boot of austerity but of those who have been seduced by the easy/high earnings of this so called industry who could have been far better and more productively employed in the sciences, engineering, medical and all the other productive roles a health society demands.

But enough of high finance. My intention is to ridicule, not excuse it.

So, how is money created? Part 2 will be published this evening.


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