Tuesday, January 30, 2018

They Want You Ruined

- Let's talk about money.
- Let's.
- Since the 2008 collapse the government has created over $3 trillion of new money, without producing much inflation. Where did all that money come from? Where did it go to?
- The government "loaned" money to the Federal Reserve Bank or "sold" bonds.  Either way, it made up money and transferred it, on terms of repayment. Easy terms of repayment, because banks can generate many times the amount of money from taking on that debt.
- How?
- They are required to keep only a small percentage of the money they have. The rest they can loan at interest. The money loaned eventually is deposited in another bank, where it too can be loaned, minus the reserve percentage. From bank to bank the money goes, less each time; ultimately many times the original deposit has been loaned.
- Where did the new trillions created go?
- The majority of Americans now have no assets, while banks and corporations are said to have trillions in un-invested cash on hand...
- The money went to the rich.
- A good guess.
- Why doesn't the government simply make up the money?
- This system is thought to be a brake on how much money the government can make up thus helping the money be more worthy of trust. But to get around the brake, all the banks had to do was find a way to bring into the system something like money but not subject to the fractional reserve requirement, and that is what they did with bundles of loans they 'deposit' with, loan to, pass on variously to each other, endlessly circulating and endlessly establishing collateral on the basis of which they loan out more money. Since the 2008 crash they've continued to do this in ever more elaborate ways.
- I understand: as long as banks keep the money circulating among themselves, its multiplication doesn't create inflation in the real economy. But while all this money is being created, isn't an equal amount being owed? Where's the profit?
- The profit accumulates to the rich as fees are charged, interest and salaries paid, stock dividends awarded. When money can be infinitely created those costs are insignificant. A part of the money funds the Federal deficit, a part pays corporations for war supplies, a part goes into the pockets of financiers.
- Won't money lose its value?
- The value of money is tied to what it can buy. Ultimately, its money is accepted because the government has the power to use force to acquire and give in exchange something real.
- I've thought in the past that the so-called austerity policies that crash economies were used to further monopoly by handing over for pennies privatized public property and foreclosed private property, and by undermining small business and self-employment in general. And deliberately crashed economies create a climate of fear authoritarian leaders use to justify repressive policies. Could it also be that punishing, authoritarian posturing is meant as a sign of government willingness to take property, whether the taking is called taxation, penalty, privatization, repossession or confiscation, and whether the taking is more from the poor than the rich, and thus backs up the money supply that otherwise has nothing behind it? Is financial speculation one of a pair with authoritarianism?

David Harvey, Capital, beginning 1:36:00