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Category Archives: Dubious Profit

Postscript to my last blog [Re: Goldman Sachs et al]. What is is with these financial services companies? Not only are they stripping the world of its wealth by creating dubious [as yet unlegislated for] financial instruments they are also boosting their profits by illegal means. Something has to be done – and soon.

I will say again, just moving money around creates ZERO wealth.

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Banker Want to make lots of money for virtually no work and minimal outlay?
Want 100% return on your reserves per annum?
Want someone else to put up all the cash?
Punter Eh?
Banker No, you don’t have to rob a bank, all you have to do is set one up. 

First acquire a suitable building, preferable high rise and made of glass and stainless steel, now install counters, all the latest electronic equipment, automaton staff and a few computers and stick a sign outside that says
The Deposit Your Money Safely Here Bank“.

Next, contact your national central bank and apply to join the International Cartel of Bankers [ICB]. Now, for every dollar the public gives you for safe keeping you can lend it back to the public and charge 10% interest.

You now give the depositor 2% interest and pocket a net profit of 8% per annum.

Punter Yes, that’s all very well, but you said I could make 100%.
Banker Ah, well here comes the clever bit. 

Because you’re now a member of the ICB club you can now lend to the public an amount up to ten times the amount you have received in deposits from the public, in other words 10 times more than your total reserves.

Punter But how can that be possible? Sounds like it must be illegal.
Banker No it’s not illegal and not only is it possible it’s encouraged by central banks and believe it or not it’s also condoned by Governments. It’s called ‘Fractional Reserve Banking’ and it really is a license to ‘print money’.
Punter You mean you actually ‘print’ money?
Banker No, that’s just a figure of speech, we don’t actually print money, the additional money you lend doesn’t actually exist. 

The checks and credit cards transactions your debtors make against the loans you grant them end up being processed by other members of the ICB. Conversely, some checks and credit cards transactions issued on loans set up by other banks end up with you, so at the end of each rolling accounting period all you have to do is swap checks and resolve electronic balances.

No actual money exchanges hands, you just start receiving real money plus interest from your debtors, for the most part on money that never existed. As long as people keep borrowing and spending it’s like a giant ‘funny money’ merry-go-round that spins off ‘real money’ that drops straight in to your coffers.

It’s one of several ways we have of stripping the real wealth from those who create it. And the best part about it is this; they are all so busy creating wealth they don’t see, understand or even care what we’re up to. And because the amount of additional money lent is ten times more than the amount deposited, you net 10% interest on an amount that’s ten times more than what you have in deposit receipts [your total reserves] each year.

In other words, for an absolutely minimal outlay – just rented bank premises, computers, software and staff costs – you can set yourself up to receive an annual income equal to the amount of money deposited at your bank, in other words 100% per annum on money that’s provided in the first place by your depositors.

It’s nothing short of exquisite.

Punter It’s outstanding! 

But wouldn’t that cause intrinsic inflation on all goods and services because an element of interest payments would be an integral part of every product cost. It would be over and above the standard inflation created by government as their own final top-up tax. It would reduce the purchasing power of real money, create a nation of unnecessary debtors and be damaging to the social system overall?

Banker Well yes, but the people who create all the wealth and those who help them are so busy creating it they don’t have the time [or the inclination] to worry about our little scheme. Besides by creating mountains of almost unlimited credit people buy more thus stimulating the economy and we can continue to live in the lifestyle we bankers have become accustomed to.
Punter But what happens if you lend so much money that you say ‘doesn’t actually exist’ and commit so many people to so much debt that they can’t pay and the whole system collapses?
Banker Well, I have to admit this does happen from time to time, but over the years we have developed safeguards that ‘kick-in’ during times of financial meltdown. 

We have ingratiated ourselves into the whole social system to such an extent that a collapse of the banking system would have grave socially unbalancing consequences for society as a whole, so grave in fact that no government would now allow it to happen.

Governments come to our aid with help in the form of bail-out packages and the like that see us through the re-occurring crises. When the economy starts to pick up we just buy back the Governments holdings at knock down prices. It’s win-win all the way to the bank (chuckle).

And the beauty of it all is that Governments borrow the bailout money from the banks using the wealth creation prospects of future generations as collateral, so not only are we stripping the wealth from the current generation we’re now stripping it from future generations.

Punter I’m in.

An unemployed wealth creator is a tragic temporary loss for any community, an unemployed social parasite is not. When we talk about rising unemployment in society we must also consider the job in which the unemployed person was engaged, otherwise the statistics are meaningless.

It’s a sad fact that many people employed [or now unemployed] in the financial services sector do not fully appreciate that their very existence is a blight on society. They think that because they get up in the morning and put in a full days work that they’ve been gainfully employed. Well I suppose you could say that is the case, except that it’s only them and the financial services company for whom they work that have gained. Society as a whole gains absolutely nothing, zero, in fact in an overall sense those employed in the wealth creation sector will have made a loss.

Now all this would not matter so much if the numbers involved represented only a small proportion of the whole. Unfortunately this is not the case, the numbers of people migrating to the financial services sector has over recent years risen to such a level that a significant proportion of the population of most western countries are now wholly supported by a dwindling population of wealth creators.

Sure, mechanization, industrialization and robotics in manufacturing industries have to a certain extent mitigated the negative effect, [machines incidentally invented, designed, made, advertized, marketed, sold and serviced exclusively by the wealth creationists], nevertheless the recent financial crisis [2008-9] caused by the avarice of the financial services sector has once again tipped the fine balance creating an untenable, worrying situation where wealth creators are now being restricted from, and in some cases, denied the opportunity to create wealth. This is the real disaster.

Virtually all the money ‘in play’ in the financial services sector has in one way or another been stripped from the wealth creators. The profits and losses reported by the ‘players’ in the financial services sector are merely occasional audits at moments in time in the continual movement of money between winners and losers, losers and winners. Of course the money swilling around is supplemented by a continuous flow of newly created wealth as it is stripped from its creators. So you could say then that in the financial services marketplace there are generally more winners than losers, but this is only possible because those in the realm of the wealth creators are always ‘losers’.

The purpose of this article is to highlight, not to offer a solution to the problem, it’s merely intended to offer some solace to those unfortunate wealth creators who find themselves unemployed at this time.

I would however also say this to them, and to those wealth creators still in employment, just one unemployed wealth creator is worth a hundred people employed in the financial services sector.

To those wealth creators who are unemployed, be proud of your past achievements, take satisfaction in the knowledge that your efforts have been beneficial to society, that your inherent skills remain intact and will again one day be utilized by an ungrateful society in the continuance of real wealth creation. Society really needs you, your re-employment is paramount to society’s proper functioning and more importantly your efforts are required in order to feed the financial services sector parasites whose voracious appetite for money continues to grow exponentially.

For a poster of wealth creators and financial parasites please visit: http://clifffraser.com/images/miscpics/wealth-creation-poster.jpg.

Sixty Eight Banks Fail in the USA

I read a news report today stating that the total number of bank failures in the USA during recent times [circa 2008/9 financial crisis] has reached the staggering number of fifty [and counting – 2009-07-31 – now it’s 68!!]. The report mentions this matter-of-factly, like it’s quite normal.

 

What this tells me, without going into any detail is that thousands of people, if not hundreds of thousands, may have lost some or all of their hard earned money. Reports like this tell me that it was the financial system that failed and it was government that allowed a financial system to evolve in which it was possible for fifty banks to fail, that failed.

 

When, oh, when are people going to start questioning what these less-than-desirable people are up to instead of accepting each monumental failure, financial catastrophe and the misery it causes without question or any call for accountability?

 

As for correcting the underlying flaws in the financial system, well after a brief flurry of activity by the new Obama administration it seems to have settled into the same old routine, financial reforms are still a long way away.

 

And it’s still a sad, sad world.

 

Postscript: July 2009

How in this world is it possible for a company that creates absolutely zero real wealth, a company that makes nothing, creates nothing [except money for itself and misery for many people], make 3 billion dollars profit in 3 months in the middle of a recession?

 

For any company in the financial sector to make a profit someone somewhere has to make a loss [perhaps it was some of those banks that went belly up]. The profit announcement was made with whoops of joy and merrymaking by the financial media like we should all be saying wow! well done! handshakes all round, the recession has bottomed out.

 

In my opinion it’s disgusting, I’m talking specifically of course about Goldman Sachs a candidate if ever there was one to be subpoenaed by the US Congress along with JP Morgan, who by all accounts have already received their ‘invitation’ this week to do a bit of squirming.