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WHERE IS THE NEW MAGIC COMING FROM?

Economic spectulation

The gradual invention of money, eventually made it possible to carry portions of wealth around in our pockets. Underlying its value was the trust that we put into its actual metallic worth.


This physical representation of wealth required a place for safe keeping as the carrier of silver and gold was in constant danger of being robbed and even killed.


Money was actually put into the safes of goldsmiths who in turn gave slips of paper indicating they had the money for safekeeping. Initially the goldsmiths charged for their service.


It was soon found that storage of money grew in quantity and if the goldsmith lent out small quantities of it, charging an interest rate, that the initial owners would not miss it and usually only required small quantities of it for themselves.


Interest was a created value that both the banker and the borrower could take advantage of and required the confidence in the parties involved in these transaction and here we find the concepts of credit, interest and interest rates.


These are the basic elelements of what we have now invented, something we call the Bank.   Commerce now depends on money, credit and interest rate as a means of measuring the value of money and the bank itself.


At another level, businesses found that they could sell shares in their businesses, referred to as stock. The value of the business could now be turned into a form of potential money as stock which went up and down depended upon the dividends, the share of profit that each business would produce.


A number of people now came together and speculated on the value of different business and their stock value related what dividends might be paid.


Banks soon fulfilled the request of investors for buying stock by borrowing money for stock purchases. We now discovered a fluctuation in both the value of money and as well as of stock. The stock market then became another concept and eventually a financial invention.


Society had moved from the physical value of money to paper money, paper credit and paper shares, all representing some type of real and created value.


Many problems evolved from this interdependent system but were patched up from time to time. The biggest problem occurred in 1929 when the stock market crashed and brought down the banks as well.


The total dependence on the workings of this system brought down many businesses and factories and therefore we saw a high rate of unemployment which further contributed to the bad times.


People with savings accounts demanded their money but most of the money was invested in long term investments where the pay back would come over a period of years, but was now mostly the in defunct stock market and in mortgages on homes that were decreasing in value. 


The capitalist system based on the complications of credit lost its magic and broke down. Money markets throughout the world also broke down. The magic of capitalism was restored after World War II and it has been doing pretty well, with some ups and downs until about a few years ago


Now the banks created a cancerous situation not unlike the crash of 1929, but this time by involving themselves in the perceived inflation of the housing market. The inflation eventually burst the housing bubble.


Speculation, greed and some criminality took away the magic. Now the banks need again to be repaired.


So far most of the banking system is all right, primarily because of a number of safety measures built into it and still remaining. However, today, the condition of the stock market is more significant as to the total economic stituation. 

Now the banks are unable to repair themselves and the disease may be spreading within the nation as well as into the rest of the world, therefore, the big question that remains is who is going to repair the banking system? Where is the new magic coming from?

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