Except perhaps for firms just about to go out of business… the four most unproductive outfits in this country would have to be the National Australia Bank, Westpac, The Commonwealth Bank, and the ANZ. After all: How much loot could you create for your only shareholder (ie for yourself) if the government gave you the right to create the lions share of any new money in this country?
There are complicating matters which will make it hard for us to show just how unproductive these guys are:
1. The act of fast but unstable money creation IN ITSELF creates the need for a vast array of financial services. The vast majority of our demand for:
currency-swaps, hedge-fund managers, financial advisors, distress loans, extra insurance, bridging loans, futures contracts, large credit-card balances, high mortgages, and on and on….
The vast majority of demand for financial products IN ITSELF comes from this high and erratic money creation which leads us all to keep low cash balances. And those balances relentlessly reducing in value.
So its not JUST having the right to create most of the new money in this country, without getting their fingers wet or inkstained. They are also very well-placed to capitalise on the extra demand for financial services that this new money creation leads to.
This is a situation akin to a glazier whose kid has a bit of a glass-smashing habit.
2. BUYING IN THE SKILLS:
Now as dull a corporate culture as these guys no doubt have, they can always get in on the MITIGATION MARKET. They can always get in on supplying products to smooth over some of the damage that these guys THEMSELVES have created.
Despite their dullness and lack of productivity they can participate in the mitigation racket simply by buying out some small merchant bank and importing in the skills that they need by this buyout route.
So its hard to find a simple a mathematical measure to show just how unproductive these outfits are. Being as they get the benefit of the money creation and easy access to this other sort of business. A bit like a maffia family who gets free money from protection rackets but also runs the garbage routes.
3. PRIOR YEARS INVESTMENT IN TECHNOLOGY.
The other thing is because these guys have had such a windfall of revenues for so very long, they get to invest in all sorts of technology that can improve their position from the point of view of traditional notions of productivity. But still I’m sure if we can come up with a reasonable mathematical formula to test their bloated inefficiency we will not be dissapointed.
WHO SHOULD GET THE BENEFIT OF NEW MONEY CREATION?
Pick me, pick me. Obviously I think it ought to be me. Give me exclusive rights to the benefit of new money creation. Then when all of us are through with thinking that it should be ourselves we have to come up with a more sensible answer.
This is the taking of real resources for a tangible benefit. What complicates the matter is that there does need to be SOME money creation. As I explained in the prior thread. There needs to be enough money creation just to keep Gross Domestic Revenue and Productive Expenditure growing as slowly as possible without actually ever falling.
So SOMEBODY needs to have this benefit. Who ought it be?
Well if it cannot be any of us individually how about us in the first instance handing that benefit over to the government as a way of reducing our tax liability? This is akin to splitting up the benefit amongst all of us.
This is not my ultimate answer. But it is my proximate answer. In the long run I want this benefit to go to our extraction industries. These guys who will extract gold, silver platinum and copper. This will keep our extraction industries highly capitalised and this would have a number of advantages beyond the scope of this thread.
But for now we can work towards taking this benefit away from the banks and giving it to the government. In this way we will be getting a number of benefits right away. But the most important one is what it will do to reform the banks. After the banks can no longer gain from money creation they will be forced to operate productively. And so our greatest immediate benefit will be THE DEVELOPMENT OF A DOMESTIC FINANCIAL SYSTEM THAT CREATES WEALTH LIKE NO OTHER.
How do you use debt to create wealth? Or put it another way. If the banks are no longer able to CREATE money how must they earn their living. Or to put it still another way, how does one use savings to create wealth.
Well this seems to have become an incredible mystery. Folks who are overly impressed by the mystery and earning power of various “financial wizards” and “rocket scientists” can often take a mystical approach to this. They think that the trick of producing new money out of thin air is ITSELF a sort of magical, wealth-creation process. They think these corporate high-fliers are their betters and that its best not to question what these high-powered modern-Medicis are up to. But these supersticious notions of high-finance are just the result of centuries of bullshit-artistry and obscurantism. Centuries of mystery and myth and even a bit of GLAMOUR….. built up around what is essentially a process of controlled embezzlement and currency debasement.
But if the currency debasement isn’t there and the banks no longer practice fractional reserve then how will they create wealth? Its quite simple really.
Wealth creation from 100%-backed-banking is about:
1. Taking in term loans from the public
2. Finding someone who already has a cashflow.
3. Allowing that person to buy some sort of capital good that will allow him to enhance that cash flow.
WEALTH CREATION THROUGH FINANCE IS ABOUT EXPANDING AN ALREADY EXISTING CASHFLOW VIA THE PURCHASE OF CAPITAL GOODS USING BORROWED MONEY.
If about 90% of savings wind up being recycled in the above way then we have a powerfully effective financial centre.
Now there are a couple of things that follow from the above.
1. It follows that this sort of resultant capitalism is really quite an egalitarian setup. Allowing people from all sorts of backgrounds to go from next to nothing to be people of substantial wealth.
2. It also follows that income tax for all but the wealthiest people must be absolutely forbidden. Because the loan will have to be paid back with an ENHANCED cashflow. And for the borrowers income tax to increase at the same time leaves him with an effective interest rate thats going to go through the roof.
3. The natural process of a an explosively progressing economy isn’t about long-term planning. Its really about constant iteration involving just about everyone in the economy and very many of them would be relentlessly updating their gear. Relentless updating their gear and taking up mini-turn-key franchises and the like. The idea is you would wait until the last minute, until you know for a fact that the new purchase will indeed expand your cash flow and then you would pay that loan of at top speed.
So under this sort of monetary/banking arrangement:
CAPITALISM IS ABOUT RELENTLESS ITERATION RATHER THAN LONG-TERM PLANNING.
4. So-called “micro-loans” aren’t meant to be some fringe charity act that ought to be subsidised. Rather micro-loans, to create wealth within the community, are the very bread and butter of what banking would be about. And we are missing out on this precisely because of the way banking and monetary-economics is handled.
THE UNBELIEVABLE GYP THAT SPECIFICALLY AUSTRALIAN BANKS HAVE GOT GOING.
It is the case that in all banking systems, banks will make their greatest profits when they are able to create new money at the fastest rate. So if the banks are able to create new money at 40% per year they will be fair swimming in profits. But then if the government stops releasing new cash, or if the banks start getting cagey, and want to build their own reserves and therefore do not wish to lend eachother as much ponzi-money……..
…. when that situation breaks out and no new money is being created then it is the way of things that bank profits will plummet. You see the fact of the matter is that modern banks make their money from new money creation. Not from judicious resource allocation. If new money stops being created, or even moreso if the total money supply starts falling….. then banks go into loss-making mode very quickly.
The Australian public probably imagines that the banks make their best profits when interest rates are rising. Actually there is an historical tendency for them to do better when interest rates are at mid-range and falling. Because historically thats when new money creation tends to be at its fastest rate. And I cannnot explain enough that our guys don’t make their profits from wealth-creation. Rather they make it from creating new money. I’ll leave it for some PHD student to back me up on this but its the fact of the matter.
Now this is the situation with banks the world over. But our banks have developed a particular gyp to mitigate the downturn in profits when money-supply growth slows down. Its just unbelievable that they have managed to arm-twist the public into making this all possible.
You see in Australia as money supply is slowing down and the Reserve Bank is increasing the overnight interest rate, Banks simply start grabbing more money hand over fist off their existing mortgage clients. Its just an astonishing racket. And we have to come to grips with how so many of the rest of us have been backed into this outrageous scam.
HOW DID THE FOUR BIG BANKS MANAGE THE INCREDIBLE GYP OF BEING ABLE TO START TAKING HUGE AMOUNTS OF EXTRA MONEY OFF EXISTING CLIENTS WHEN THE RESERVE BANK DECIDES TO JACK UP OVERNIGHT LOAN RATES?
Its truly an amazing thing that they have acheived. For while it still remains true that their profits are about to take a dive, yet here is this marvellous compensatory mechanism that these shylocks have managed to angle themselves towards. In effect they have thrown off even more of the punishment for recession away from themselves and onto others, so that they have locked the rest of us in to this fast monetary growth. This fast monetary growth which allows these guys to be fat, inefficient, stupid and unproductive and still manage to gain profits hand-over-fist.
THEY’VE CONVINCED EVERY SONOFABITCH TO TAKE UP VARIABLE LOANS.
Now just how did they pull of such an incredible coup? This is NOT capitalism. This is NOT freedom of choice. Though it may appear to be capitalism and freedom of choice on the surface of things. Rather this is backdoor cronyism. This is what modern life in Australia is all about. Backdoor cronyism masquerading as freedom of choice and capitalism. An outrageously tilted playing field masquerading as a level playing field.
This cronyism, this fake-ass free-enterprise, THIS SUCCUBIS IN FREEDOMS CLOTHES STARTS WITH THE BANKS. so we must find out how it comes about.
It is important to suss out how these dull inefficient cronies have managed to pull this astonishing racket off. Seemingly with our co-operation.
The real reason here is that cash has lost its “STORE OF VALUE” function. Which in reality, and in the minds of your average punter, now resides in real estate. So with real estate as the store of value, it wasn’t that hard a deal to get everyone signing up for floating interest rates over forty year contracts. These sorts of long-term contracts with floating rates could never have been put over on us if cash had always been slowly increasing in value.
This scenario where the banks crank up interest rates to current borrowers in response to THEY-THEMSELVES doing-it-tough is entirely unnatural.