I had a conversation today in which I confessed my love-hate relationship with the BBC. On the one hand their professionalism is sans pareil. They make lots of good programmes. But there are increasingly few (do I mean decreasingly many?) which illuminate the many desperate problems which face us. And I think they do this on purpose.
For the umpteenth time this evening I sat slack-jawed in front of Newsnight. I am not as bright as a citizen should be – as we need all citizens to be. But I spend hours every week reading and listening to economists.
I would suppose that makes me more acquainted with economics than most of my fellow voters. If I challenged you to name four Nobel Prize winners in Economics, or the most influential academic economist of the late twentieth century, or the dominant economic school in the western world, how would you do? I sorta know who the players are. I sorta know what the broad brush differences are. I know that Samuelson was an idiot. He predicted that the Soviet Union would bury the West. He wondered whether the gulag was worth the shortage of toilet paper (or was it vice versa?)
I am a crappy economist. I sorta struggle with Sey’s Law – probably spelt his name wrong. I get von Mises critique of socialist price theory – there is no such thing. But I know more Economics than anybody in my street, perhaps than anybody in Stretford.
When it comes to the Maths of Economics I am pretty well totally at sea.
So, at 20:35 we have Jeremy Paxman interviewing a Rothschild and a few others. Did I expect to be illuminated? I did not. Was I? I was not.
There exists a phenomenon which I have mentioned in earlier posts. It is called fractional reserve banking. This is rather difficult to understand – not just because it is complicated (it is), but that it turns out to be legal.
They way banking is supposed to work and the way it did work initially was as follows:
Mr A decided not to spend his substance on “goodies” but to save money instead. He chose to invest the cash in a bank. The bank promised to invest his money in a promising business which would pay interest on the investment. They further agreed to share the interest with Mr A.
Nothing could be fairer.
The bank, though, offered his money not to “a promising business” but to 33 “promising” (all of it, not just one thirty-third) businesses, nearly all the money to all of them, all of which would pay interest on what you and I think of Mr A’s money. Bankers make money umpteen times over on Mt A’s decision not to buy “goodies”.
Is this something that Newsnight shares with you when explaining problems with the banking system? It is not!
I share with you not my economic sophistication but my rage with those who would ignore common sense. You can’t make money (or increase wealth) by doing arithmetic. The only way you can increase wealth is by increasing production. There are those who think that increasing demand is the answer. This is stupid. Demand is already and always will be infinite.
Was fractional reserve banking mentioned? Not before I switched Newsnight off. Ask anybody you know what fractional reserve banking is.
It is pure legal theft. It's theft, in the same way that deliberate government cash creation is theft.