| Special Privilege
The theme of "special privileges" awarded to "elites" is a pretty transparent repackaging of Marx's idea of class struggle. Instead of 'Proletariat' and 'Bourgeoisie' (words that are extremely unlikely to have any meaning to the target audience for this drivel) we're going to have "us" against the "elites." Perhaps instead of Special Privilege the book should be called Marxism for Dummies or Class Struggle in America: a Primer in Marxism.
The author tells us that... As soon as a bank makes such loans, it can no longer fulfill its stated obligation to return depositor's money on demand. Money that is out on loan, quite simply, is not available to be paid back to depositors on demand. No degree of added complexity can negate this simple fact. It sure is a simple fact. In fact it's so simple that only a simpleton could fall for it. Does anybody actually think they're going to get back exactly the same dollar bills they deposited? I mean, how dumb do you have to be to expect that your electronically-deposited paycheck is going to come out of the ATM as a spray of electrons? Who is the target audience for this book, Afghan aborigines? Most people are astute enough to know that the phone company hasn't really run a wire from their house to every other house on the planet. What really happens when you make a call is that they quickly find some idle wires and string them together until they have a path from your house to the place you called. As soon as you hang up, the same wires get assigned to somebody else. This is what banks do with currency. It's what grocery companies do with food. It's how we manage resources in general, so as not to go broke. It is true that if everyone in town picks up their phone at the same instant, or goes to the grocery store on the same day, or withdraws all their money from the bank, there won't be enough to go around. But only an idiot would propose that the way to fix this is to dedicate a wire from everyone's house to every other house, and enough currency in every bank to cover everyone's deposits simultaneously, and enough produce in the grocery store to cover the eventuality that every single person in town comes in on the same day. That is enormously wasteful. To understand that though, one must have some common sense. The people the author wishes to reach with this book are the ones who have no common sense, and who think it's perfectly reasonable to demand that no one ever run out of anything, no matter how improbable the demand. The author also tells us that "few people have a well-conceived, proper understanding of exactly what [money] is." But then he goes on to say that, "The second major component of our money supply consists of bank deposits (checking, savings, etc.), which are liabilities that banks create against themselves, limited only by their reserves at the Fed." What that tells us is that he doesn't understand it, either. It looks like he's trying to get to a definition of what's called "M2", but he gets it wrong. A reasonable attempt to get it right is here. The next thing the author tries to tell his victims about "is the self-perpetuating cycle: if money is created out of thin air and (mostly) lent out at interest, there will not be enough to repay all those debts unless still more is created out of thin air and lent out at interest!" The scene the author is trying to paint here is the dead-end one, where you borrow a hundred thousand bucks, put it under your mattress until the load matures, and then find that you don't have the five per cent the bank wants for interest. Your only choice is to borrow the five per cent, and the cycle never ends. This is the so-called "zero economic growth" scenario, and it is used here because zero economic growth is at the heart of what the Fed kookburgers are pitching. Many of their prescriptions actually would work, if the society that adopted them was willing to tolerate zero economic growth. Instead, let's visit the real world, where you borrow the hundred thousand and build your third pizza parlor. You already know, since you have two of them, that it takes about three years for a pizza parlor to pay back the money invested in it, and after that it returns about 23% on the assets invested in it. Now when the loan comes due, you pay back the loan, and the 5%, and you're left with a pizza parlor that throws off $23,000 a year for the next twenty years. Boy, those bankers sure did stick it to you, right? But wait... it gets worse. The author wants to convince his readers that no one should be allowed to build a pizza parlor at all. That would cause Pizza Elites, who know secret recipes that only Mamma Maria ever disclosed. In the spirit of class struggle, we can't allow anyone to get ahead. So what we'll have is... 100% reserve banking! Here's the author again:
Simply put, the Fischer and Graham suggestions would have required that all demand deposits (checkbook money) be physically kept in the bank and not lent out. See, now there isn't any money to loan. The banks are just big warehouses. Instead of paying people interest on their deposits, they charge people storage fees. And the money all stays in the bank. So when the American entrepreneur comes calling, hoping to find some money he can borrow to start a pizza business, he can't have any. Nor can anyone else. All money has to stay in the bank, because otherwise we might have economic growth, and mere serfs would be stepping out of their "place" to become pizza barons and inventors and stuff. Our author thinks that's bad. Instead he wants to charge the serfs to store their money, to get back at the financial elites. It amazes me that supposedly intelligent Freepers embrace this crap, and even preach it like a gospel. At least once a month we have a thread on this, and the same half-dozen grassy-know-it-alls cheer for class struggle, and zero economic growth, and restricting economic mobility by making it impossible for ordinary people to get ahead. In another note I had called this stuff "what happens when ignorance goes bad." That's exactly what this stuff is. Ignorance gone bad. |
It really irks me that there are people who would prey on those who never studied this subject by trying to sell them such awful drivel.
I found the description of the "monetary elites" hilarious. The author must be assuming that there are still some yokels left who believe that the people managing the banks actually own them, and get to keep the money... sort of like the cartoon guy on the Monopoly box. That must be the level of understanding that the author is targeting, because no one else would believe that bank managers are anything but salaried employees who make pretty much the same sort of money that's made by, say, the people who work at Barnes & Noble. The Great Satan himself, Alan Greenspan, makes $136,700 a year as Fed Chairman. We have Freepers who make more money than that. Some monetary elite he is.