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Sunday, June 10, 2012

Everything Is Monetized, Shut Up And Get Used To It!


Guest post by groo, culled from the comments at Ian's place.

Now what is a bank?

The holder of deposits and lender of credit en par?

This was not even true 300 years ago.

In an ideal case, the "bank" is an arbitrageur between a holder of temporary surplus and a creditor of temporary deficit, plus a risk premium.

Never true.

Pious lie. No. Not pious. The pepper-sacks already were notorious cheaters.

Because of what?


It is much easier to cheat on abstractions than real substance. Simple as that. All trade by intermediaries is based on that simple fact.

Do not want to bore you. (I know my Michael Hudson, so don't bore me with trivialities.)

Derivatives nowadays amount to the hundreds of trillions and are held 95.9% by five banks. Specifically, of the $250 trillion:

...a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure.
Now what does that mean?

Nobody seems to notice: Logically, those derivatives are owed within the Club!

Now what does that mean?

Some 10 trillion are outside the club. Unsuspecting idiots, right? Everything else is hot air.

This meager 10 trillion is the potential substance, approximately 1/5th world GDP, which is large enough, actually too large.

One tenth world GDP at most is actually at our disposal at any time (probably much less, because of the shrinking pie of world consumption.)

Everything else, well, is incest, i.e., "owners" "owing" to themselves.

World heritage is around 200 trillion total. not more. Not less. As a monetary equivalent this is 1/5th the world heritage!

Digest this mindboggling fact at your peril, as your doctor says.

World heritage is around 200 trillion total...

Actually I have been meditating about that for some years, and found out, unsurprisingly, that this number is just that: A number.

Maybe appealing to numbers guys - but actually the world, above a certain limit of basic needs, is innumerable.

Just like a piece of art, which is arbitrarely valued, the world, (e.g., environment), cannot be valued, which poses an unsurmountable hurdle for all those beancounters out there. But, because they are beancounters, they cannot recognize items larger than a bean.

StewartM asks:

Why not instead resurrect the Bank of the United States?
Because you then touch the holy grail, which is "interest."

Everything monetized carries interest, which in total is 40-60% of all monetary transactions. (This is why all transactions "need" to be monetized, because then interest can be extracted.)

Every property whatever carries interest in the capitalist system (that the "interest" is associated with "risk", and therefore is justified, is a self-serving myth to the myth.)

You can estimate this, on average, to approx 5% of all property, which adds up to 50%, and indirectly compounds to this staggering sum.

The rest being the state - not carrying interest - which is about 20-30%, and the remains being "your" generation of (ahem) "value," or however you term it.

If you touch this "secret," and are in the business of money creation (e.g., banking, or retail in the business of secondary money-creation,) you are fired the next day.

You can see this by adding up land value, daily needs, energy, wars, etc.

Or put it the other way round:

If you own, say ONE million of whatever, you can basically free-ride on the rest of society.

If you own FIVE million, you can affort a decent life with a couple of wage-slaves (who engage in the interest treadmill, also supporting your lifestyle.)

If you own FIFTY million, you can afford a decent professor of economics or other "expert" to argue in your behalf.

This is the perpetuum mobile.

Thus see where, as a society, we are.

Henry George touched the issue of "land value," which is the main issue of justice.

(Americans do not like contemplating his ideas, because they basically stole the land from the indigenous people of the Americas, and transformed it to "property."

They then stole the land from the Mexicans across the Southwest, who in turn stole it from somebody else.)

Now, the native Americans had no conception of land property.

It was European feudal thinking, which infiltrated the new continent and transformed virgin land into interest-carrying land/raw-materials value (i.e., farmland, oil-wells, gold-mines.)

How did this come about?

What is the role of property-law? How can this be justified?

Questions, questions, questions.

Here we are: Might makes right.

Despicable as it is, but here we are.

To establish some "Indian reservations" was just putting lipstick on the pig - it was and remains brutal theft.

"Money" is just an abstraction, it transforms the lip-sticked pig into a Mona Lisa.

Shut up and get used to it!

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