(audio version below)
If lumber companies produce lumber, and drug companies produce drugs, what do banks produce?
If you had your wheaties this morning, you might have guessed the answer. The correct answer is “debt”.
We often think of banks as a place to keep our money safely stored for us. Some of us are old, sorry, experienced enough, to remember that great old comedy, The Beverly Hillbillies. One of my favorite episodes was when Mr Drysdale convinced Jed Clampett to deposit his millions into his bank. Jed later decided to pull his money back out of the bank for some reason and Mr Drysdale had a devil of a time trying to explain he couldn’t have it back because it was invested already. It made this kid think a little bit even back then, about how banks really work. They aren’t just a storage tank for your money. What they are are financial institutions which use your deposits as collateral for larger loans which they create using that collateral which you provided when you made that deposit. The maximum multiple used to be i believe something like 10 to one. That is banks were allowed to lend ten dollars for every one on deposit, but that was in the old days.
This heightens the absurdity of how banks function, when you consider that you might receive a dollar a year on a hundred bucks if your bank is particularly generous, while they skim, sorry earn, 10 or 20 percent on a thousand dollars of loans based on your deposit. So perhaps making 200 bucks a year and generously offering you a dollar bill a year for your trust.
Butt, all that aside, why do we use money in the first place? Isn’t it’s fundamental purpose convenience? Gone are the days where the farmer takes 10 gallons of cream to the local store and comes home with some hardware to hold up the sagging barn door. Now we saunter in there and slap our card on the reader and KAABOOM, it’s all done. How wunnerful.
If the story ended there, it would be arguably perfect. An absolutely perfect system. Convenient and fair for all concerned. Trouble is, and the flaw does not lie entirely with banks, people want stuff they do not have the means to acquire. And secondly, people are incredibly creative in their ability to justify the use and abuse of credit.
Whoever said, “neither a borrower nor a lender be”, ( Indiana Jones was it?) had apparently had some personal experience with credit. Might have been he who also said that ” everytime you lend something to a friend you damage his memory”. Clever dude that Indiana Jones…
I mean, what if nobody used credit at all, whatsoever? What if people who wanted stuff went out and actually worked until they had the means to acquire what they wanted? Am i suggesting the problem of worldwide credit bombs blowing up all over the place has it’s roots in a lack of human patience? Why yes, yes i am! And banks are simply the business with the understanding that if you offer someone a chance to grab the thing RIGHT NOW, about 80 percent of the people are going to elbow their way to the front of the line. Butt, what is the end result of all this full faith and credit stuff?
Well, do you suppose that all this magic money flowing from banker’s spigots, increases the price of everything out there that is for sale? Imagine a world where real goods were required to buy real goods…everytime and always. Or a world where gold, silver and copper were the required items. We most certainly would not be talking about 35 trillion dollars of debt slavery in the dsa, now would we?
Another immediate effect would be a much more active citizenry. This would be a world where “you don’t have to work unless you are one of those rare people who require eating”. Creative minds would come up with solutions pretty quickly one would guess, and those without the capacity to realize things are different, would find themselves heading for boot hill on a wagon. Harsh? You bet, but this is the direction things are clearly taking already, just in a more roundabout fashion. When the capacity to repay disappears, we will find out who has been swimming naked, as Mr Buffet used to speculate.
Even those who own physical property outright are not safe from becoming refugees, should the flow of dollars pile up somewhere. I include a link to a recent article in the Yukon News for your perusal, should you care to look into what happens to property tax delinquents in what used to be known as Canada: https://www.yukon-news.com/news/list-of-whitehorse-properties-owing-taxes-comes-before-city-council-7773889 Pretty harsh, and there is no mention of refunding the overage received when the property is sold after a mere 18 months!
Perhaps the convenience of the paper credit we call money is outweighed by the disadvantages of it’s use? sumpin’ to ponder…….
your interest payment is due and payable sir.
Skulltripper 