WHEN MONEY GOES BAD, THINGS GET WORSE
One of the more dubious clichés of the Naughties was ‘unfit for purpose’. To spot such a condition – in a Government, financial, or educational institution – is a very good thing, if it’s true. But by the end of the decade now happily behind us, it had joined ‘in total disarray’ as one of those attacks based entirely on political point-scoring rather than reality.
More accurately, the truth is usually that some crafty person (out to either make money or avoid brickbats) has already changed the purpose of the institution. Thus it becomes unfit for its previous purpose, but fit for its new one. At this point, it is necessary for people of commonsense and insight to observe that the purpose is unfit for the institution, and must end in tears.
You could apply this rule to almost all the key offices, institutions and policies of Western socio-economic cultural structures.
Established to protect the citizen from the excesses of Government, the US Federal Treasury is in effect now the means by which the citizen pays the banking system to repair self-inflicted damage. Unable to cope with the changing nature of crime, Britain’s police force switched to being a sort of social services back-up, adept in the ways of cultural diversity management. Unwilling to remain in the relative backwater of regional home loans, mutual savings and loan outfits changed into World Class plc banks. Too undisciplined and bored to simply turn out children with sound and profound learning skills, the UK’s teachers chose to play at social engineering. Primary care medicine has eschewed the tough and demanding job of being a socio-medical service in favour of playing at business.
These and many other purpose-switches have ended in a great many tears being shed by all concerned. But the area of human behaviour where it has been most devastating for all of us is money.
I use the word ‘money’ because it is the one thing common to social, media, economic, fiscal and financial activities. All other terms – banking, investment, commerce, business and so forth – overlap, but are in some ways mutually exclusive. To say ‘the way we use money now is unfit for purpose’ covers the whole rainbow on Mammon without exception.
What was the original purpose of money? Quite simply – to have an agreed measurement of exchange value for buying and selling.
What we do today is buy and sell money. Money has almost entirely become credit. Or put more exactly, debt. Debt is cheap or expensive depending on how healthy your credit rating is. The less real money you’ve got, the more expensive credit will be. Under such a perversion, concentrations of wealth (China) and debt (America) are a certainty. And bankruptcy and default (Greece and Ireland) are almost inevitable.
What was the original purpose of a house? It was somewhere to provide a home: shelter and storage for a family unit.
What we do today is treat houses like pensions. The trauma of losing them is thus incalculable.
Why did people originally invest in currencies? Because those currencies reflected the health or otherwise of one economy versus another.
In 2011, currencies have become an odd mixture of mercantile weapon, safe haven and pure speculation. The link to economic health has been lost in a fog of manipulation. (The same is true of gold and silver).
Why did people go to work fifty years ago? To earn a ‘steady’ income, fill up a pension fund, gain fulfilment, and perhaps one day learn enough to go off on their own.
Today, the safe job has gone. Most people go to work to make money to spend money to buy stuff….to want more to get credit to keep the desire fresh. (Only in the last year have people stopped doing this. As a result, capitalism’s crisis has worsened).
Why should people invest in the Stock Market? They used to do this as a way to benefit from and reward the more entrepreneurial and inventive companies….so they could expand, prosper, and keep capitalism vital.
During 2010, people invested in the Stock Market because it offered (for a limited window of time) a better return than other investment forms. As a result, a FTSE standing today at 6000 is the nearest thing you will find to a 20,000 gilder tulip.
Why did the Hedge get invented? To allow people to place each-way bets rather then risk all or nothing.
Today’s Hedge Fund is so far from this, it doesn’t even deserve the name any more. Hedgies attack targets, manipulate values and make complex, light-speed transactions. The point of these is to make money, unrelated to performance, for the few at the expense of the many. And in some cases, to break the law.
What were derivatives originally for? To guarantee prices in risky commodity businesses like mining and farming. People were offered options or futures in a mutually beneficial way to, again, spread risk for producers, distributors, and refiners. The value was ‘derived from’ the commodity.
The contemporary market for derivatives is basically a global betting shop in which the original ‘crops’ – wheat or pork bellies – have become utterly irrelevant. It is the derivatives market itself that now drives the derivatives market. And the sector is ten times the value of the global GDP. You can buy a derivative of everything from copper tubing to (literally) who might win the Champions League.
Last and most heinously, what are banks supposed to do? The answer is, keep money safe while investing it for savers, lending it for sound business purposes, and enabling families to have the security of a home they owned as an asset. Making a margin between attracted and lent money is about the simplest, safest way to get rich (and grow economic wealth) invented by any animal being.
Banks now – especially investment and merchant banks – spend the greater majority of their time swapping paper with each other, packaging excrement to reduce its smell, and underwriting megadeals that, above all other outcomes, put people out of work. Their involvement in these lines of work not only contributes nothing to the wider growth of economic wealth, it has bankrupted most Western governments, and destroyed the savings of millions. (And the damage is a long way from done).
In short, the fundamental problem faced by humans interacting in societies, as we enter the Second Decade, is this: our money-purposes have become unfit for species.
Put another way, the system has become the cart, and we’re the horses getting flogged. It’s supposed to be the other way round.
The current free-market, globalist model of capitalism asks almost all of us to:
- Reward the few at the expense of the many
- Spend when we know we should save
- Bail out people mostly richer than ourselves
- Earn less in real terms than we used to
- Lose our life balance and job security
- Neglect our children and communities
- Think short-term about everything
- Be party to practices that are probably bad for the Planet.
Until this upside-down dilemma is faced and tackled, there will be no real recovery. Coalitions will fall, governments will default, geopolitics will get increasingly dangerous, societies will become unstable – and inequities of wealth will widen. The eventual result of this will be some form of revolution. And the aftermath of that will be illiberal chaos.
A Happy New Year to all.
The Slog 