Finance
There were gold coins. Your gold coin’s value was the value of the gold. Then we printed paper bills and kept equivalent values of gold somewhere safe. Ends up the gold was not even necessary. Trust is gold. For decades we have been printing money and saying it has value because we trust it has. But then even that currency has been a challenge in most countries. You print too many of those, and you end up with inflation: too many paper bills chasing too few goods and services. Even strong, responsible, mature governments sometimes buckle when hit by currency speculators. And then there are stocks markets and globally roving bands of investors.
Then there’s leveraging. When you deposit a hundred bucks in the bank, the bank, based on that $100 deposit, can loan out a thousand bucks. It’s a good thing. The money goes further that way. So if leveraging is innovation, why is a 20 times leverage not better than 10? What if the bank figures out a way to give out $2,000 in loans? Looks like the financial innovators were able to push that out to 30. A dollar in real money was circulating like it was $30.
But then some loans go bad, or maybe a lot more than some go bad, and the system can collapse like in 2008 when it felt like the whole economy collapsed like a house of cards. A house cleaning like the one of 2008 happens about once every 70 years. But does it need to happen again? Does it need to be painful? Can the system not force banks to periodically get rid of bad loans? So there is no one grand collapse?
Companies, like individuals, should have credit histories. But maybe the math should be that 5% of the loans will go bad. You wait a few years, and you write them off. Regulators make sure you do.
Also, if a bank is too big to fail, it is too big.
One thing that perplexes me is, we try so hard to leverage. We try to get one dollar to run around like it were 30 dollars. And at the same time the system collectively parks trillions of dollars between nations in symbolic no man’s lands. Money should want to grow. Money should move like ocean currents.
Just like the Great Depression gave us macroeconomics, before that we only had microeconomics, I was hoping the Great Recession would give us a globoeconomics, but it didn’t. It was a wasted recession that way. Trillions of dollars sit around while there is this huge need for infrastructure, credit and clean energy in the Global South. We should get everyone online, like yesterday. The parked money is also evidence wages can be substantially higher in the rich countries.
I understand race better than finance. So I am going to say this is racism. America built infrastructure in Europe and then it stopped. Why stop? Why not also build infrastructure in Africa?
One ray of hope is the blockchain technology. Money should move around globally like email.
China And The Next Thousand Years
Money: 100% Digital, 100% Global, 100% On The Blockchain, 100% In Circulation
