Let's forget about the "greed" of bankers or hedge funders in the present
financial fiasco. They are just as greedy as the rest of us. Given the same
opportunities, almost any other group of people would act exactly the same
as they have done and will continue to do. Bankers are just as greedy as
the early industrialists of the early 19th century. They are just as greedy
as the trade unions which destroyed eight automotive industries in my home
town of Coventry and threw it into recession for 15 years -- with not much
better health since.
Choosing the greed which must take first place as the main cause of our
present misery, today's bankers are just as greedy as the politicians of
Western Europe were more than a century ago -- British, German, Belgian,
French, Dutch, Portuguese, Spanish, Italian -- who saw opportunities for
rich pickings in much of Asia, Africa and South America. (Not North
America, however. The Brits had already received a bloody nose there and
the other European politicians paid due attention.) Oh! and we must also
mention the rapidly industrialising Japan which had designs on Russia and
China.
Some of the Western European countries (and Japan) were surging ahead in a
wave of unparalleled prosperity and also a fast-developing series of
military inventions such as machine guns and artillery and monster
battleships which could easily subdue "backward" and "primitive" people
elsewhere. However, it was when the West Europeans started turning their
weaponry on each other in the 1914-18 war, that the fatal self-inflicted
mistake was made.
Despite the fantastic prosperity of the industrial revolution and the
increasing ease of raising lumps of taxation from year to year, the cost of
military weaponry raced forward at an even faster rate. So European
governments had to go into debt. But then they discovered that it was
becoming difficult to pay those debts out of taxation, so they hit on
another dodge. They had very deferential, manipulable electorates (after
all, they had been willing to die in their millions on jingoistic pretexts)
so it was a relatively easy matter to pretend that printing more and more
bank-notes (nowadays called Quantitative Easing) was doing no harm even
though they no longer had any underlying value.
Politicians even conned many economists (from the time of Keynes onwards).
Some of the latter even began to make ridiculous comments such as: "A
country has to have debt. Otherwise, how can its central bank set basic
interest rates for the rest of the economy?". These economists obviously
knew no history, when interest rates (and other things such as credits and
simple futures derivatives) had been used for at least 5,500 years already.
Well, that's where we are now. For about a century, Western governments
(and now all governments) played fast and loose with bank-note printing,
not only for their own immediate purposes (their civil services also
becoming increasingly greedy) but also to devalue the debts they had
already incurred.
But then, round about the 1980s, banks and other financial groupies
discovered a wonderful thing. They, too, could print a variety of new paper
documents -- sophisticated derivatives -- which they could pretend to be
money among themselves and their customers. Some of these paper documents,
such as Credit Default Swaps (CDSs), didn't need to be based on anything
one owned (or were indebted for) or indeed any amount of money that had any
connection at all with reality. A bank or a hedge fund could insure
themselves for anybody's else's transactions for any amount of money, far
beyond the value of the transactions involved.
So that's where we are. We -- starting with the European Monetary Union --
are now on the verge of chaos and also with every single advanced
government in debt. Japan is leading the way with a debt that's twice its
total annual economy. There's not a hope of Japan's debt or any of the rest
ever being paid off without a massive bouts of hyperinflation to follow at
some stage.
It's about time economists started teaching themselves some basic history
and, then, maybe, telling politicians that it's time to start all over
again with sensible currencies that always existed until imperialistic
greed took over a century ago.
Keith
Keith Hudson, Saltford, England
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