Even before the COVID-19 pandemic, the economies of
the world were showing unhealthy signs that foretold of serious troubles ahead.
After the pandemic, the troubles grew so large, they became impossible to size
up, let alone devise a solution for them using the conventional economic tools.
The suspicion is even there that the old tools may have played a role in
creating the troubles to begin with.
But before we can begin thinking of an “out of the box
solution,” we must identify the fundamentals that make up an economy so that we
can stand on those fundamentals and erect a structure for a new economy that
will lead to a better way of doing things without being devoured by the handful
of individuals and institutions in the existing economy that have the habit of
acquiring and stashing nearly all of what’s meant to be distributed equitably
among the millions.
We must understand that before the industrial age, the
farmers, miners and artisans relied very little on currency such as pieces of
gold or silver to conduct business. Their main mode of exchange was the barter,
which means they exchanged what they produced for what they needed. Other
workers such as healers, entertainers and teachers exchanged their services for
tangible goods or coins made of precious metals.
There was lending but the practice was limited given
that those who needed to borrow had no means to pay back the loan. Other
would-be borrowers were usually associated with an estate, and having a steady
income, but were in need of an immediate infusion of liquidity for a specific
purpose, and had the means to pay back both the principal and the accumulated
interest.
The Industrial Revolution, which took decades to be
fully established, changed all that. By the time it reached a high point, there
was the need to create a supreme authority––later known as the central
bank––that would be in charge of creating and disposing of promissory notes
called money. During the time that the industrial age was getting established,
the barter system was gradually vanishing, and the trading in goods and
services was done more and more with money, being the new medium of exchange.
Money that is printed by a machine at the central
bank, is not wealth. The goods and services that people produce, represent the
wealth that belongs to those who produce it. The Industrial Revolution that
helped produce goods in bulk thanks to the machine, and helped turn the
dispensation of services into a communal act such as teaching a classroom of
pupils, also made it so that money became the yardstick that's used to measure
and represent the value of the goods or services someone produces. It was
supposed to be the more work you do the more money you get, but things turned
out differently.
In fact, from that moment forward, the size of your
wealth no longer depended on how much you worked and produced, but how much
bank notes you accumulated by hook or by crook. Those in the financial services
being close to the central bank have the best opportunity to accumulate
money––heretofore considered wealth. They accumulate via the manipulation of
so-called financial instruments. These are tricks that allow the crooks to keep
most of what comes out the central bank's printing press, causing the financial
service industries to cease serving the public, and become part of a financial
self-service syndicate.
But how is the economy supposed to work in theory,
anyway? Well, stripped of the complexities of the modern economy, what is
supposed to happen is the following: You wake up one morning, and think up a
gadget that people will want to have in their homes. You need money to execute
the project but have none, which is how things are supposed to be.
You go to the central bank, and borrow ten thousand
dollars. You hire the people and buy the raw material with which you complete
the project. You sell the gadgets as you produce them throughout the day. By
the evening, you would have sold most of what you produced for ten thousand and
one hundred dollars, which you give back to the bank. The remaining gadgets are
your profit, which you sell or barter with you neighbors for goods and services
they produce and you need for your family.
Suppose now that you did not have access to the
central bank and were forced to borrow from a commercial bank. In the old days
when the banking system was honest and devoid of tricky instruments such as
derivatives, the commercial bank would have acted as conduit. It would have
borrowed ten thousand dollars from the central bank, handed it to you and
required that you return it as ten thousand and two hundred dollars at the end
of the day. In turn, the commercial would have returned ten thousand and one
hundred dollars to the central, keeping one hundred dollars to pay its own
employees and settle other invoices.
Today, however, the commercial banks are more than
conduits channeling money from the central to their clients. They call
themselves investment banks, and want you to believe they are helping you
invest your money when in fact, they would be scheming to become the senior
partner in your enterprise, a position they achieve by hook, by crook and by
every method they can think of. Their collaborators in this game are called
portfolio managers, arbitrageurs, market makers, brokers, hedge fund managers,
traders, financiers and what have you.
Whereas wealth is created by the farmers, miners and
blue collar workers toiling in the shops, construction sites and what have you
–– as well as the white collar workers toiling in the offices, classrooms,
hospitals and what have you, the money that is printed to represent what they
produce does not go directly to them, but goes first to the investment and
commercial banks, and from there to those who produce the wealth.
And guess what. Whereas members of the syndicate pay
themselves millions of dollars when they get hired and when they get fired,
those who produce the wealth live from hand to mouth when they get hired, and
go on skid row when they get fired.
Clearly then, the system must change, and the only
people that can change it are the chairs of the central banks. However,
although they are supposed to be independent of the government that appoints
them, they are not independent enough to overhaul the system. For this reason,
and to make it so that the chairs of the central banks will be accountable to
the public, they will have to be elected by the public.