Sunday, August 30, 2009

An Interesting Theory

If you ever study evolution beyond that which you were required to do as a student (I was a student at a Christian school so had to study it myself), you will find some interesting facts. First, evolution does not optimize for a given thing; it merely finds the best option currently available. The old joke is that a gazelle doesn't actually have to be faster than a lion to get away; it just has to be faster than the slowest gazelle. An organism doesn't have to be the best at what it does, it just has to be better than the others.

Another interesting point is that evolution really does not like success. If it did, we'd still be cowering in our caves wondering if the tyrannosauri were hungry tonight. They all died off because they had become so specialized for a world that had been very static for a very long time. When an organism become extremely adapted to its locale, it can lose the ability to survive outside of the locale. The little furry mammals, however, had the ability to survive outside the comfort zone of the dinosaurs, so, despite that they were not strictly competitive with the dinosaurs, they won out simply because the dinosaurs did not survive.

One thing that has to be said at this point, no matter how one feels about it, is that society is essentially an evolutionary system. I know that this statement generally causes annoyance from those who hear it, as they launch into tirades about the evils of social darwinism, but the simple fact is that anyone can see the impact in history of this darwinism, and it explains the dominance of the English speakers to a large extent in that the English speakers were the ones willing to do the sorts of things that would achieve dominance. However, it was not always so, and it will not always be so.

These same English speakers have become extremely effective at their niche. They have become so good at it they appear to have violated some of the rules of proper exploitation, one of which is to not be too much of a burden, or the masses will throw your yoke off and likely separate your head from your body for good measure.

So we now have most of the world embroiled in a banking disaster created largely by the English speakers, bought into by almost everyone with a pair of dimes to rub together. The response of the banking community, which largely controls the levers of power in the west, and, indeed, much of the east, is to funnel funds from the public store to preserve their lives.

One is tempted to think of the dinosaurs, perhaps facing a desperately cold winter, huddling together trying to save their lives, in the face of their certain destruction. This is exactly what these bankers are doing. Having been so remarkably effective at their niche, they have pretty much gotten to a position where they cannot survive without the niche, so will defend that niche at all costs.

The problem, as any reader of this blog knows, is that they don't produce anything. Were they lending their money, a concept found ridiculous a long time ago by bankers, they would produce value by providing capital, and their actions would not be in any way inflationary. Were banks lending out funds on deposit for that very purpose, such as certificates of deposit or bonds, then we'd not have any problem, either. However, for a very long time, they've been lending out money created for that purpose by the fed. That's not even quite right, as they only have to have a certain percentage on hand in liquid reserves, that percentage actually below 1% right now due to 'quantitative easing'. Seriously, the whole thing stinks to high heaven like fraud, but, as one analyst keeps pointing out, it's not really fraud if it's legal.

In the old days, banks had money. They lent that money to good ideas and made a profit. Or they lent it to bad ideas and took a beating. Either way, it was their own future they messed with. There were no sub insurers, underwriters and so on, so when a bank failed, it normally only took out its own depositors. There were limited failures of banks where a region would lose a large percentage of its banks, mostly due to speculating of one kind or another, where bankers lost their heads, but nothing like this scale.

After the invention of the fed, banks began to more and more act as conduits for fed money rather than to make their own investment decisions. This led to the current situation where the banker is nearly purely parasitic, existing as a puppet of the fed and the treasury, spending his entire life complying with endless regulations to get his snout into the trough of newly-created paper. For being a good little pig, he gets his cut of every dollar he conduits.

The end result is that banks have completely forgotten that creating value was how they made money; they invested in new production and that new production brought improved lives and happiness to many, which meant that nobody resented the banks because they actually helped people. Now, banks are machines that tick the appropriate boxes and do their best outside those restrictions to maximize their profit stream at the expense of everyone. Hence, most major banks make most of their money in their consumer banking operations from fees, as, despite that it costs them essentially nothing to bounce a check, they now charge north of $30 for that 'service'.

The problem is that the niche they now inhabit is that of cheap government money, and, like the warm rain forests the dinosaurs lived in, that may not last long. And, like the dinosaurs, bankers have become so specialized that the modern banking system cannot even exist without the niche. It is doubtful if individual bankers and economists will be able to adapt.

However, there is still lots of inertia in the system. The peasants are angry, and the bankers are being forced to make concessions, such as the recent court order to the fed to divulge to whom loans were made and why and the increasing calls for a full fed audit, but people don't really know why things suck. Our entire lives, things have been getting steadily worse; we all know it. Sure, technology has made lots of things better, but the quality of construction of most things has been steadily deteriorating. The actual cost of living has been climbing. In the fifties, it was expected that a man could provide a nice life for an entire family, and families were large then. Now, both spouses have to work, often just to keep body and soul together.

As I've gone over before, when a significant percentage of the population is not producing anything anyone wants, they drive the price up for everyone else. Because of how we've allowed our banking system to grow, the banking system and all its workers essentially get our work for free. They are now nearly completely parasitical. They play their derivative games, engineer all investment vehicles so nobody else can make any money, and generally screw with all of us for their personal gain, and we let them. The problem is that when the public at large has finally had enough, nobody knows which direction the anger will spew.

I could remark about Frenchmen storming the Bastille. I could remark about Dutchmen throwing their wooden shoes (sabots) into the machinery. I could remark about the US Civil War, which was really about economic oppression more than anything else (which is why it started in a port, and not on land, where the slaves actually were). I could remark about the fall of the second reich (the Weimar Republic) leading to the rise of Adolf Hitler. All these things are a result of the same witches brew we have simmering in our caldron over here.

If the president does not take strong and active steps to break the power of the banks, eventually the public will tire of losing ground every day of their lives. Some charismatic leader may be all it takes.

And, for you conspiracy nuts, it is almost never the person currently in power that decides to take over and create the new utopia; it is some unknown blowhard right now building a power base somewhere nobody knows. Seriously; go look at the rise of Hitler. He was a persistent and utter failure as a politician until events lined up just so and he suddenly became everyone's darling. Once again, seriously, Germans thought him a savior and handed him the keys to the kingdom.

So, the bureau still stands by its recommendations: let the banks fail, lower taxes, cut services, recall military from the rest of the globe, and concentrate on reducing impediments to new businesses. Everything else is just perpetuating a system that failed so long ago it is nothing but a rotting hulk at this time, at its core people who are morally adrift, willing to ride on the backs of the rest of us.

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