In our time we’ve witnessed the zenith of global finance. In 2006 the world’s total economic output was worth around $47 trillion. The total value of stock and bond markets was roughly $119 trillion. More than twice the size. And the amount outstanding of the strange new financial life-form known as derivatives was $473 trillion. Ten times larger ... This is the story of financial globalisation. Professor Niall Ferguson, Ascent of Money e6: Chimerica, 2010
According to [George] Soros’s Theory of Reflexivity, financial markets can’t possibly be perfectly efficient much less rational ... His biggest coups came from being right about losers not winners. And the greatest of these was among the most momentous speculative hits in all of financial history. On September 16th 1992 with the British £ in big trouble I watched as Soros put out a contract on the Bank of England ... So sure was he that the £ would drop that he bet ten billion dollars. ibid.
The Nobel Prize in Economics. It seemed as if Intellect had triumphed over Intuition. As if rocket science had taken over from risk-taking. Equipped with their magical black box, the partners in LTCM seemed poised to make money far beyond the wildest imaginings of even George Soros. And then in the summer of 1998 when every self-respecting hedge-fund manager should have been playing with his yacht something happened that threatened to blow the lid right off the Nobel Prize winner’s black box: Reality started to misbehave ... On Monday August 17th 1998 a giant asteroid smashed into Planet Finance. ibid.
The only chance of survival was to find a White Knight to rescue them. And the most powerful Knight in town was none other than George Soros. It was the ultimate humiliation: the Quants from Planet Finance begging for a bail-out from the Prophet of Irrational Unquantifiable Reflexivity ... Fear that Long Term’s failure could trigger a general financial meltdown, the New York Federal Reserve hastily brokered a multi-billion-dollar bailout by fourteen Wall Street banks. ibid.
The ascent of money has seldom been smooth. Time and again it’s been punctuated by big painful crises. ibid.
American borrowers have come to rely on Chinese savers, a symbiotic relationship between China and America that I call Chimerica. ibid.
So enormous have Chinese saving become in recent years they’ve enabled globalisation to do the most almighty U-turn. Previously, it was the rich English speakers who leant money to the poor Asian periphery. But now it’s the Chinese who are lending money to the Americans. Welcome to the strange new hybrid country of China and America – I call it Chimerica. ibid.
The People’s republic of China has become banker to the United States of America. ibid.
What starts with competition for Olympic medals could end in a battle over dollars if the Chinese decide one day to cut off their credit line to the American empire. Maybe as it name suggests Chimerica is nothing more than a chimera ... The really big crises come just seldom enough to be beyond the living memory of the people who run today’s companies, banks and funds. ibid.
The Ascent of Money has been one of the key factors in human progress, an extraordinary story of innovation, intermediation and integration that has done as much as anything to help people escape from the drudgery of subsistence agriculture. And yet Planet Finance can never quite escape from the gravitational force of Planet Earth. Because the Quants can never take full account of the human factor – our tendency to underestimate the probability of black swans. Our propensity to veer from euphoria to despondency. Our chronic inability to learn from History. ibid.
The vast majority of money is not created by the Mint; it is created in huge amounts every day by private corporations known as banks. Paul Grignon, Money as Debt I
Banks create the money they loan. ibid.
Privately created bank credit is legally convertible to government issued fiat currency. ibid.
Money is literally created as debt. New money is created whenever anyone takes a loan from the bank. ibid.
Banks loan money they do not have! ibid.
No loans = no money: which is what happened in the Great Depression. ibid.
Can this really go on for ever? Is not a collapse inevitable? ibid.
Government debt is a major component of the total debt, and servicing that debt takes a big chunk of our taxes. ibid.
Why create money as debt at all? ibid.
Is it a conspiracy? ibid.
The entire world economy now runs on a system of credit provided by banks. And when that credit system breaks down everyone suffers. Paul Grignon, Money As Debt II: Promises Unleashed
The account is a promise to pay, not the money itself. (Money & Banks & Debt & Economics & Federal Reserve & Credit) ibid.
The banking system functions as one bank. ibid.
Banks differ from counterfitters in that the banks are legally allowed to create new money, but only by certain rules of accounting. ibid.
Almost all the money in existence today is bank credit. ibid.
Virtually every dollar comes into existence as debt. ibid.
An obvious problem with our current financial system is that it rewards greed and corruption. Greed and corruption seem to be everywhere. Paul Grignon, Money as Debt III: Evolution Beyond Money
In our current bank credit as money system the principle amount of a bank loan is simply created from the borrower’s promise to pay back the principle plus the interest in money. ibid.
Flow is the real measure of economic activity. ibid.
The real value of the money that flows in our economy today is created by our promises of future productive work. ibid.
Almost all money is bank credit: debt money. ibid.
The Day of Reckoning can be pushed back but only by passing the debt to generations yet unborn. ibid.
Gold is inconvenient ... Why any single commodity? ... It makes the value of money exclusively dependent on the quantity of that one commodity. ibid.
We use national fiat currencies and bank promises. ibid.
Only the richest 10% come out ahead. ibid.
About 95% of all money is bank credit. ibid.
Money in reality is just an accounting of debt. ibid.
The bank assets lost were promises to pay legal tender the banks never had. ibid.
The bailout scam was the biggest daylight robbery in the history of the world. So far. ibid.
The basis of freedom is essentially the freedom to exchange. ibid.
This ever growing national debt expands the money supply when new money is created by the central bank to buy more government debt. ibid.
Witnessing government performance to date many people believe that returning the full power to create money to corrupt incompetent politicians will not only fail to solve our problems it would be the height of insanity. ibid.
Pure fiat money in a free market is an illusion. There is no such thing. ibid.
Digital coins could be passed from one owner to another, peer to peer. ibid.
The all-inclusive self-issued credit system. ibid.
Money created as money debt only works with perpetual growth of debt. ibid.
Money becomes money by acceptance. ibid.
Our money does not have to be in the form of loans to or from a bank. ibid.
Money as a single uniform commodity is the root of the problem. ibid.
Think about taking back of money power with self-issued credit. ibid.
But in 2000 Iceland’s government began a broad policy of deregulation that would have disastrous consequences. (Banks & Iceland) Charles H Ferguson, Inside Job, 2010
In a five-year period these three tiny banks which had never operated outside of Iceland borrowed $120,000,000,000 – ten times the size of Iceland’s economy. The bankers showered money on themselves, each other and their friends. ibid.
When Iceland’s banks collapsed at the end of 2008 unemployment tripled in six months. ibid.
In September 2008 the bankruptcy of US Investment Bank Lehman Brothers and the collapse of the world’s largest insurance company AIG triggered a global financial crisis. The result was a global recession. ibid.
This crisis was not an accident. It was caused by an out-of- control industry. ibid.
In the 1980s the financial industry exploded; the investment banks went public giving them huge amounts of stockholder money. People on Wall Street started getting rich. ibid.
By the end of the decade hundreds of savings and loans companies had failed ... Thousands of Savings & Loans executives went to jail for looting their companies. One of the most extreme cases was Charles Keating. ibid.
By the late 1990s the financial sector had consolidated into a few gigantic firms; each of them so large their failure could threaten the whole financial sector. ibid.