RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: The Other Side of the (money) Equation  Wed Oct 01, 2014 8:03 pm | |
| “Hey Joe, may I borrow your lawnmower?”
“Sure Tom, there’s half a tank of gas in it.”
There. That’s a loan. Joe loaned Tom his lawnmower. It was an agreement. It was about something physical–the lawnmower–but the loan itself was just a mental act. It was an act of consent between two volitional men.
There’s nothing else to it. If Tom fills up the tank, then it was a profitable loan for Joe. If he empties the tank, then it was a loss for Joe. But neither profit nor loss has anything to do with the nature of the loan. We can add terms to the loan–Tom will sharpen the blade, fill the tank, pay some money, use it for one day–but none of those terms change what the loan is…a mutual agreement, a promise to deliver or use a good or service.
That’s what your money is…that and nothing else. It is a loan, a loan originated at a Central Bank and passed through many, many hands until it gets to you. It is a promise to do something. The Banks and government promise that others will accept that money “as payment for all debts, public and private.” And you–the borrower–promise something too, that you will provide a good or service sufficient to have someone else trade that much money–their claims to loans–with you.
But no matter how many hands are involved, and regardless of how people value the goods and services for which they trade, it’s still just a loan. It’s something you promise; it’s something you value; it’s something you think and choose. If the loan is collaterized, then there is a good or service behind the loan, such that if one party defaults, then the good or service belongs to the other party.
At one time, money itself was collaterized, usually with gold. This did not change the nature of a loan. Through fractionalized banking, the relatively stable amount of collateral backed an ever-increasing supply of money. So while the note said that it was a claim against gold, it wasn’t. Like all loans, it was a claim for someone’s promise, in this case Central Banks and governments, to come up with the gold if necessary. But there was far less gold than the amount collaterized, again owing to fractionalized banking. In common lingo, we call that “cheating,” especially when you know you can outlaw the requirement to honor the collateral of the loan, if it ever comes to that.
It’s an old story—an unsuccessful con man becomes a successful strong-arm man. On the societal level, we call this “order.” But it only works orderly if everyone involved sticks to their promises. We already know the Banks/government don’t stick to their promises. They issue an ever-growing amount of money to denominate a population’s goods and services–and along the way make a profit just for issuing the loan in the first place–and are offering a claim not only on current goods and services, but future ones as well. This is often the case with a loan.
Notice that the scam of ever-increasing loans would be immediately obvious were it not for taxes and the various sinkholes of governments. While a government needs taxes for its own (claims to) goods and services, it also needs a way to take money “off the table,” so to speak, in order that nobody notices the insane growth of loans in circulation. It does this at origination, whereby the issuance of the loan itself requires an ongoing fee, commonly called “interest.” Through the never-ending issuance of money, and the associated interest that goes along with it, a certain amount of the ever-cycling money is paid as interest to the Central Banks. As with a “rake” in a poker game, this keeps the money in circulation–on the table, we could call it–steady enough and low enough so that each participant is satisfied with what he believes will be his claim to goods and services. Were it not for these “originating fees,” ultimately paid by taxes, the participants would quickly see that they are trading current labor for a promise of much less labor–via goods and services–in the future. They would quickly say, “No deal.”
But they don’t, because a percentage of those claims are constantly funneled “off the table” through the simple waste of Government and especially through the never-ending charge for the origination of the loan.
None of that is the point of this essay. All of that is about the denomination of goods and services, but it is not about the goods and services themselves. That is “The Other Side of the Equation."
Rest of essay here: http://noslaverynow.wordpress.com/2014/02/11/the-other-side-of-the-equation/ |
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