[ExI] Money Games

[The Avantguardian]

-- On Fri, 12/12/08, Emlyn <emlynoregan at gmail.com> wrote:

> Money:
> I think money competitions are more common in the offline
> world,
> simply because it works as a default; you might have
> nothing in common
> with those geographically close to you, but you all need
> money, so you
> can all compete with money.
> You can have pissing contests over houses, cars, etc, all
> of that is
> money as the characteristic resource. Intellect, special
> knowledge,
> time, all these can contribute to mitigate absolute money
> costs of
> such a competition, but ultimately a bigger wallet will
> dwarf all
> else.

Coincidently trying to raise seed capital amidst a world-wide-recession has caused me to think a lot about money lately. 

http://en.wikipedia.org/wiki/Fractional_reserve_banking

An American commercial bank gets to loan out approximately $4 ($3.57 actually) for every $1 they have on hand. Such money is created by the very act of borrowing it from a bank. So every dollar out there is a dollar that some schmoe owes to a bank at interest and every bank can loan out nearly four times the money it has on hand for four times the interest. Meanwhile the only *real* money in the economy is held by the banks in reserve.

In other words, the money in ciculation is not wealth at all but simply debt that *somebody* out there owes a bank no matter who is actually in possesion of the dollar in question. And if the loans go bad, the banks try to find a sucker to buy them. And if the suckers won't bite, the banks get bailed out by government-coerced tax-payers with no questions asked. Plus they get all that nifty foreclosed real estate.

No wonder so much money can just disappear so suddenly when only 1 in 5 dollars is actually backed by a real dollar while the others are like virtual dollars that exist at the discretion of a single industry. IMHO, the invisible hand of the capitalist free market tried to strangle the defective banking system and failed. We are essentially giving them prizes for being market losers. The monetary system is like a parasite's paradise courtesy of the government. 

I think the fractional reserve system is the culprit responsible for bubbles, recessions, the Great Depression and other market anomalies. That a few talented or well-connected individuals can make money speculating on these market spasms doesn't mean that the spasms are not a symptom of a glitch in the system. At the best of times, banks operate as bottlenecks that retard the free and efficient flow of capital throughout the economy. And at the worst of times, they can bring the entire economy to its knees. No single industry should be allowed to have so much power over all other industries, the government, and people.
 
For a cartoon that explains it quite nicely see:

http://video.google.com/videoplay?docid=-9050474362583451279

Stuart LaForge

"It is a terrible thing to see and have no vision." - Helen Keller