Wednesday, February 9, 2011

Against the forces of evil, AKA 'banks'

There are many evil forces out there, I today will write about just one of them. They are called 'banks' and they and I regularly cross swords in my constant battles to save the world. Or something like that.

It is said that the word 'banker' is just one 'w' away from a more accurate term. This is correct. Bankers make their money out of money which is, in my opinion, wrong. Money should be made by at least making something or providing some sort of tangible service. It doesn't have to be something that you can physically hold, just something that adds 'worth' to the world. Making money out of money, does not fit this.

One of the main methods of doing this is 'interest'. 'Interest' is an interesting thing (ha ha ha ha.... no), basically it goes like this:

Normal Person: Hello, I need to borrow some money from you to buy a house. I promise to pay you back since I get paid every month. Thing is, to buy a house straight away would mean that I have to live on the street while I saved up for 10 years. Can you help?

Banker: Why yes foolish drone, of course. We can give you the money becuase we have lots of it that people give to us to look after or something.

Normal Person: That's great! Where do I sign?

Banker: Butttttt there is a condition. If you take this money, you have to pay us more than you too.

Normal Person: Why? That's not fair! It's not even your money to begin with, why should you charge me to borrow it?

Banker: Because we give the money you pay for the money that we give you that is not really ours to the people who had the money to begin with.

Normal Person: Well... that seems fair. I mean, I am after all using a service and so on. How much do you charge.

Banker: 10% of what you borrow...

Normal Person: And may I ask... how much do the people that the money originally belonged to get?

Banker: 5%, minus tax, minus fees, minus...

Normal Person: I'll stop you there, you are saying that, by sitting there, taking money of someone and then giving it to me, you can skim 5% plus some more of the top?

Banker: :-D

Normal Person: :-|

Banker: What? Think this suit and office pays for itself?

Normal Person: :-|
Banker: So, you sign here...

Normal Person: Wait....

Banker: What?

Normal Person: Why don't I just ask the people who gave you the money originally to lend me the money and pay them the 5% directly? You can't stop me can you?

Banker: Errrr..... becuase you'd never find one person with all the money you need?

Normal Person: So I find a few people then and take it.

Banker: I see no problem there...

Normal Person: :-D

Banker: Bollocks...

OK OK OK.... vastly simplified I know, (so sue me) but you get the gist, banks exist by giving money to people who don't have it from people that do have it and skimming a bit lot of the top. Yes, without this 'service' we would never really be able to do anything because, by taking money from people who have it and distributing it to those that need it means that money flows around and doesn't get stagnated (in theory...). But do they really need to charge for this? Or charge so much? No, but they can and do.

This, amongst other things, lead to the financial crisis we are going through. Let me explain... not only do banks make money out of skimming money off the top but they also make money of giving money to people to buy stupid stuff via things like credit cards because many economies are built on the idea that you get people to buy stuff so you can pay other people to make the stuff they buy. Stupid stuff that you don't really need. And the money that is lent to these people so they can buy stuff to keep other people in a job? They can't pay it back which causes the bank to go 'oh crap' and borrow money from another bank to fill the hole left in it's account so it can safely keep giving people credit cards so they can buy more stuff. Which it can't pay back becuase the people with the credit cards don't have the money to pay back still, they just have credit cards. Which leads to the bank that lent it the money to also go 'oh crap' and then borrow money from another bank to, once again, fill the hole.  And thus the cycle goes on and on until everyone is going 'oh crap'. 

Again, vastly simplified and maybe I'll talk about it another time in more depth but it leads to this. Effectively, you have banks borrowing from each other to cover up what they can't pay back from each other so they can keep giving out money that people can't pay back. It doesn't take a genius to think 'erm... so where does this money come from and what happens when it runs out?'. Simple answer? Everything goes boom....

When the money runs out people panic. The world runs on money. Without money, people start not getting paid and fired. If people don't get paid, they can't buy stuff. If they can't buy stuff then the people making the stuff they buy also get fired becuase they aren't buying stuff. Then these people also can't buy stuff so even more people get fired. Meanwhile, the banks are still out of money, and, here is an important thing, they have also spent the money that some people gave them to look after. Which means there is even less money out there. Then, some people who gave their money to the banks realize, 'hey! The banks is giving our money to stupid people, let's take it back and keep it under our mattresses' to which the banks say 'oh crap' and banks as everyone takes their money away. Except lots of people won't get their money becuase the money simply isn't there.

The upshot is lots of people running around panicking trying to work out where to get more money from so they can fill up the hole. But the thing is, the hole can never be filled. Give the banks more money and they just give it to people to spend on stupid stuff or people take it away to put under the mattress at home. Also, to get more money means you need to make more of the damn stuff and to do that, you can either print it or try and get people back in work so they can get paid and start buying stuff again. Printing is easy but means the value of the money goes down and that not good (you now have more money out there, but nothing else has changed, it's just more bits of paper). Getting people jobs just puts off the problem for later, once they are back buying stuff then sooner or later, someone will be giving out credit cards and we start the merry circus again...

The solution is simple. I'll do my little bit on 'Islamic' banking to make me feel better. It's not really 'Islamic', it's just common sense and I don't like the term 'Islamic' being added to it but that's life. Anyway in a nutshell, with 'Islamic' banking does not have the whole 'interest' thing (in theory...). Instead, you take the money that you need and at the end you can, with no obligation, give a lump sum back to the persons you borrowed it from, which pretty much everyone does if they can afford it. Also, (in theory...) an 'Islamic' bank wouldn't let you take money for stupid stuff. And no credit cards (in theory...) Unfortunately, 'Islamic' banking these days has taken on the face of what I wrote about above and, as a result, is a bit crap. Still, this has lead to lots of Muslims making their own groups of people to lend and look after money which works pretty well since they are built on trust and community and not credit cards. We can live in hope that this grows but I won't hold my breath. 

It's quite simple, stop giving money to people who can't pay it back, stop giving it for stupid stuff and stop charging people so much to borrow it when they need it. But to do that would mean changing the economy completely. First of all, we'd have to stop have economies based on buying loads of stuff we don't need with money we don't have. That will mean changing people's mindset as well, we live in a world where buying 'stuff' is what keeps so many going. It's stupid but so is life. Again, you can hold your breath but I'm not holding mine.

Oh, also, banks and bankers also refuse to acnowlage my paypal account, bounce my cheques, take forever to process my payslips, charge me for a debit card, have long queues, open at bizarre times then close for 'lunch' that lasts for hours, use forms that seem to have been printed on postage stamps, lose all your papers anyway when you've filled them and refuse to let me have an account without some obscure unobtainable document (the latest being 'proof of address from the UK even though you don't live there anymore and haven't for nearly three years, good luck finding one sucker'). But that is for another day.




  1. do u know Hong Leong Bank also has 'Islamic' banking? haha
    btw i like this writing. :D

  2. Hi Captain Jack, ahhh the banksters of the west & the misery they inflict on everybody.

    I wrote an article late last year about Kelantan business & the issuance of the gold dinar as legal currency. Inevitably such an article touches on banking practices so if you're interested here's the link:

    btw....thanks for kind words on British expats forum.


  3. Thanks Michael. I'm going to revisit this topic later on as since I wrote it at the beginning of the year things haven't improved at all. It was also the post I enjoyed writing the most :-D

    You're article is interesting and I will use it. The fact that people are choosing to buy gold rather than Fiat currencies shows how the trust in the system is degrading and perhaps heralds the future. It'll be interesting to see how it has progressed. I also read the Royal Mint of Malaysia does issue bullion coins as well anyway but none of the 'legal tender' business.

    Regardless, once I get a blogroll I'll be linking to your site at least.



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