I am not a doom monger. The end of our society ought to happen when we are ready to usher in an actual civilisation. A society is one with rules and public institutions and a civilisation is one with people and common sense.
Let me start with a story. In 1920's America, people wore hats. Men wore hats. Women wore hats. The rich wore hats. The poor wore hats. Perhaps someone would insist that this hat wearing would end and no-one would wear a hat. Predicting when hats would no longer be worn outdoors would be impossible. Thus it is with predicting an economic crash or societal crash. Predicting when is impossible.
Let me colour the picture in for you. One Saturday, you would buy an expensive hat and on Monday your co-workers would admire it. However, there would come a time when you would buy an expensive hat and your co-workers would ask why you had wasted so much money on a hat and mock you.
This relates directly to when the financial system will crash. On Saturday, you have a conservatory added to your home, On Monday, your co-workers tell you how much value you have added to your home. At some point, your co-workers will mock you for an extension or attic conversion as a waste of money. Thus attitudes change and we all now this.
Now, should 2% of us decide to withdraw our entire savings and investments (pension) from the financial system, the financial sector would simply collapse.
Similarly, should 2% of us decide to withdraw our bank credits from our bank accounts, the banking sector would simply collapse.
I could not realistically predict when hat wearing would go out of or come back into fashion. In the same way I cannot predict when 2% of people would attempt to withdraw their funds due to a collapse of confidence in the banking or financial sector.
Some of you will probably want to know where I got the 2% figure from. Completely ignoring the basic point, the banking and financial system is based solely upon our confidence that it is fair and just and not simply a fraud committed against humanity.
Regardless, let me discuss five near complete failures of the financial system in my brief (50 year) lifetime. So, 1971. Foreign central banks could redeem US dollars for gold. Then Nixon told them they couldn't for a short period of time. They still can't. Black Friday in 1987. The 1997 Asian financial crash. The 2002 tech bubble crash. The 2008 Global Financial crisis. As the financial system still continues then you could argue that it is robust. Well, the financial system continues as we still have confidence in it. I say confidence, most people are indifferent to it.
The financial and banking sectors will never collapse whilst we still have confidence in them. In 2008, the banks needed bailing out. So, the govts borrowed 'money' from the banks and then gave it back to them. How much 'money' did the US banks need? No one knew or knows. Three bankers wrote as big a number as they thought they could get away with and three senators agreed. One of the senators stated that he was told that if he said no, the world would end as we know it. One of the three men who wrote the number on the back of an envelope admitted that it was just a guess.
Now, none of this matters. Each head of a central bank has only one function to perform. To do nothing which would cause 2% or more of the population to lose confidence in the dollar / pound / euro. In the UK, in order to meet demands for pension pay outs, the Bank of England bought near worthless govt bonds at full price. To keep a few massive financial institutions viable, the Bank of England bought near worthless corporate debt at full price. Did this effect our confidence in the pound? No. The Bank of England has unlimited buying power. It can buy the world simply by pressing the alpha numeric character known as 'one' on a keyboard and then holding down the zero key for as long as it takes. The only thing stopping them is the fact that we might or would lose confidence in the pound / financial system as a result of their actions.
Again, many very powerful bankers will state that there are rules and regulations which would prevent the Bank of England from buying everything and they are both correct and incorrect. If you recall, Zimbabwe decide to try this and the other central banks disowned them. A trillion dollar zimbabwee note is worth around one fresh doughnut. So, the rules and regulations are there but their only role is too help maintain credibility and confidence.
Fundamentally, it does not matter what I write. You will believe whatever it is you believe.
How about this. The IMF is made up of the heads of the worlds central banks. The IMF maintains a consensus. Should a central bank start trying to buy everything, the IMF will isolate them. The currency of the rogue central bank collapses to zero. However, the head of the IMF lost his job for being caught indulging in two favoured hobbies of bankers - hookers and blow. Did this effect our confidence in the entire financial system? No, he got the sack and Christine got the job.
Our confidence in the financial system is near absolute. Or perhaps, our indifference is? Or perhaps we live in a near perfect society of non-critical thinkers. I don't see the collapse of our society as a bad thing. Provided, that we are able to birth a civilisation of critically thinking human beings. This is the vision I share and continue with the Lord Jesus Christ our Saviour. To live in a world where people use their eyes to see and their ears to listen.
Executive summary
We, the people, use bank credit as if it were money
Banks are allowed to create unlimited bank credit to satisfy any loan application
Central banks are allowed to create bank credit to buy anything
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Some of you will believe that banks can only lend 10 times the 'money' that they have. One of the UK's banks topped out at 413 just as the 2008 collapse started. What this means is a bank that lends out ten times its own 'money' can survive a 10% drop in its assets value. (Without a central bank bail out.) At 413, the smallest of asset price drops causes complete bankrupcy. Yet, confidence remains near absolute. No-one cares. When 2% care, it is game over for our society.
Society is founded on fear and fear of anarchy allows society to continue.
The instant a member of society no longer fears what will happen when society / banks / finance collapse is the moment they begin to thrive in a human civilisation.
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Again we are back to belief.
Do you believe that our society is founded upon fear?
If you believe that society is not founded on fear then nothing anyone will ever say or do will change your mind. In fact, you are more likely to choose to die than reverse such a powerfully held belief. Thus the dawning of a human civilisation patiently awaits your death and hopes that your children are not as childlike as you.
Or you can have a serious go at critical thought. Increase your own self awareness. In doing so enhance your awareness of others and truly begin to understand the world in which you live. Buying my three books may help this necessary, in my opinion, transformation.
With any luck, the books will be free over Christmas, starting December 25th and lasting for five days. Book One will be free for five days starting Saturday.
Be seeing you
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