If you know what is really going on the very question will hit you like a “trick question” and a revelation rolled into one.
As excellent as the Austrian and British Classical Schools are in terms of being such well thought out edifices of human reason ……. They are not true to the situation we face ourselves in. Take profit maximisation just for example? Does anyone go from being in rags, to being a property magnate, on the grounds of profit maximisation? No of course not. So what are the bigshots really chasing?
If profit maximisation were really the goal of DECISION-MAKERS (ie real humans with influence (as opposed to getting locked into any “theory of the firm”)), then under even reasonably (only reasonably) sound background conditions, resource allocation would not be too bad, as against the disgrace of resource allocation we see today.
Not the individual banks, but the banks TAKEN AS A CARTEL create money out of thin air. But people are right to object to us throwing moral opprobrium on this racket, on the grounds that; the banks cannot be getting the full benefit of the counterfeiting racket that a counterfeiter would. Because after all when their asset (your debt) is created, the banks also have a new liability on their balance sheets, of the same quantity in short order.
Now the banking system rigs it that their liability will always reduce in value, and therefore can be dismissed, and their asset will always out-pace inflation. They rig this with central bank policy. I’ve heard this wicket called “arbitrage” and its been suggested that the answer is to force tighter money on the central bank. Ha ha. Like any politician is in a position to push the banking sector around. Like a central bank is beholden to anyone but the banking sector? Maybe in the sixties in the southern hemisphere such a fantasy could be sustained.
But its not just a matter of arbitrage or a difference of opinion on monetary policy. And if it is HERE its certainly not, when it comes to the Northern hemisphere.
Nonetheless the people who argue correctly that the banking industries new assets (via their money creation scam) are always matched by the same quantity of addition to their new liabilities, do have a point.
How is this resolved to the moral disfavour of this obvious counterfeiting racket?:
The fact is that like most scams, the scammer has to share a bit of the booty out to middlemen. The illegal drugs booty (economic rent) is shared out to the street dealer. And the cartel picks up “little-fish” now and again (as the cop in “Scarface would have it.”)
The legal drug-dealing scammers, who are fundamentally the same scammers as the afformentioned networks ….. well they have to give the Doctors a cut. Doctors being after all, drug-dealing prescription writers first, and health professionals second, and for the most part sincere in both their roles.
So the point of business, or at least the way to get rich, is NOT to profit maximise. Its to give up such notions, about the time you give up on Santa Claus. You see you want to be the other beneficiary to the money creation scam. The banks cannot be the total beneficiary. The banks must accept the liabilities they are bound to incur, along with the assets they expropriate through trickery.
Your mission (should you choose to accept it) is to be the partner to the bankers money-creation scam. This involves you getting the best interest rate available, on a SURE THING, which in practice means having excellent collateral.
The banks create money on sure things. Thats why the instincts of people like Professor Quiggin and the great writer Bob Ellis are dead-on when it comes to privatisation. Because what happens is that the investment bankers, the lawyers, the economic consultants …. well they all tongue the ear of the sitting politicians, and get a SURE THING. Competitive business IS NEVER SUPPOSED TO BE A SURE THING. A sure thing is proof of market dysfunction.
Then they pyramid money creation against this sure thing. The net result is that we take all the good things AND ADD DEBT BURDENS TO THEM. Privatisation is about taking something good, AND ADDING DEBT TO IT. That debt has come about through new money creation. The resources therefore having been expropriated from other Australians.
Moving on we see that there are a lot of get-rich gurus out there in the book market. Some of them are really smart guys who have proved their mettle in good times and bad. And when you boil down what they have to offer, you find that getting rich is about seeking out the fractional reserve subsidy. Getting rich is about being on the other half of the money-creation racket. Its about being the partner with the banking cartel, wherein they extort the wealth of society through new money creation, and your job is to be the other half of that windfall.
Not long ago I scored a big low-interest loan. It took all my high-interest debt off the table and it turned my life around. Unless there is a sudden sado-monetary epoch that throws most people out of work, this constitutes a massive subsidy. A massive subsidy that I don’t deserve in micro, but that I can consider it okay for me to accept as compensation for taxes and for being stiffed when I fell into debt-addiction.
Well thats a single loan for me. But the rich slobs are getting this subsidy week in week out, pretty much from the time they turn 21. And we need a REAL new deal, to set this thing to rights and to make sure that no-one gets the money creation subsidy any more ……. the treasury and the extraction industries, alone excepted.