Blog 12

2008-October-21

Banking: The Way Forward

Let us get this straight; there's not a bank in the world that creates wealth. The real money they handle comes from those people in society that create wealth and have some surplus. The banks acquire a significant proportion of their wealth from the wealth producing class using a myriad of wealth extraction methods they they have developed over many years.

So here we are in 2008, the banks have spent, lost, gambled, whatever, much of the money they have either ‘acquired’ or are 'looking after' [client deposits] or created out of thin air. Because of gross mismanagement of their respective countries wealth, the banks are the instigators of yet another global economic catastrophe.

It's very strange then that Governments around the world seem to be of the opinion that the answer to the problem is to give the banks more money.

HELLOOOO???

The banks caused the problem!

It seems to me that given the circumstances, the banks are the least worthy social sector to receive Government money as a panacea to the financial mess they created in the first place.

Even the doom and gloom, recession, depression, unemployment, lack of consumer confidence etc, pundits don’t seem to be getting it. So I will say it again the banks caused this problem not the creators of real wealth .

I think it is generally accepted that the price of property is determined by what people can afford, not necessarily what it is worth or what it costs to produce. It stands to reason then that if the amount of credit available is increased the cost of property will increase commensurately. Under the present banking arrangements banks can lend as much as 10 times more than they have in reserve, a mandate if ever there was one to ensure that the requirement for credit will also increase. It's a geometric upward spiral of seemingly unlimited bank credit, price increases, false values and credit requirement.

In the days when Governments had tighter control of credit, the maximum mortgage credit available to families was 80% of valuation based on twice the breadwinners income. I recently heard of banks offering 125% of the property valuation based on six times the total household income. It really is no wonder FMac and FMae went belly up. You might also wonder where the banks and financial institutions get all the money they lend? Well most of it (up to 90%) doesn't actually exist. Because the banks operate as a national/ international cartel, it's just paper (credit agreements) and electronic money that goes round and round. Governments apparently couldn't care less, it's obvious they gave up their responsibility of the money supply to private banks years ago.

In the beginning there was gold, then there was gold backed currency, then there was fiat currency, then there was funny money, now there's really funny money.

What I find very curious at the height of the 2008 financial crisis is the total absence of any questions or explanation as to what the banks and financial institutions did with all the money they apparently 'lost'.

The tragedy and my real worry is that the highly dubious and socially unacceptable machinations of the banks are now affecting the ability of the wealth producers to create wealth efficiently. Furthermore, the wealth creator’s socially beneficial support of the non-wealth producing class is in jeopardy. The banks and financial institutions of the world have again seriously wounded the wealth creation Goose. The raw materials are still there, the factories are still there, the wealth creationists willingness to create is still there, all that has happened is the banks have failed yet again to keep the boat steady. For any massive, worldwide fraud to survive it takes stealth and extreme expertise, the fact that the financial system fails on a regular basis is proof positive that the perpetrators are neither stealthy nor expert.

When are governments going to realize that the money supply and the amount of credit available are fundamental to the proper organization of society. So fundamental that it can only be administered by a 'benevolent organization', Government², not left to self interested villains who have a proven record of total disregard for the well being of society as a whole.

The replacement of central banks with a genuinely Federal, non-partisan Monetary Control Ministry with absolutely no affiliation to any bank is vital. It is unthinkable that any country's defense department would be in the hands of private enterprise. It's equally unthinkable that a country’s financial security, something possibly more important than defense, should have been allowed to slip into the hands of private enterprise.

Unfortunately, the current system has been around for so long, generations of economists consider the system, despite its regular failures to be normal. Only by dealing with the fundamental flaws in the financial sector will the way be clear to install a system that will ultimately lead to a more prosperous world.

The wealth creation class has already proved they can support not only themselves but also the multitude that create no wealth. It's simple math that if the ratio of wealth creators to non-wealth creators were increased by just 10%, poverty in the world would be well on the way to elimination. The goal of course would be to increase the ratio to as high a proportion as is practically possible. There, I’ve admitted that some non-wealth creators are tolerable in society.

If you need any help determining who makes up the wealth and non-wealth producing classes visit my personal webpage here.  

Footnotes
² I Know, most Governments are not exactly benevolent, but who else is there?  Back

See Also
Who creates the ‘real wealth’ in the world?

Financial Parasites

 

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