The illusion of illusion, or go kick a stone

The Vedas inform us that all that is around us is maya, illusion, if you will. That's a huge pill for many to swallow. We resort to Dr. Johnson's infamous refutation of Bishop Berkeley's immaterialist philosophy -- the first argumentum ad lapidem -- in which he kicked a rather large stone and exclaimed, "I refute it thus." That has settled the case for most of us, I suppose for the ensuing almost 300 years. But maybe it really hasn't resolved the issue at all.

For adherents of that latter-day religion known as Materialism, it absolutely conclusive, but like the zealous adherents of most religions, it is easier to ignore what doesn't fit into one's belief system than it is to accept what challenges it. It turns out that roughly 68% of the Universe is dark energy. Dark matter makes up about 27%. The rest - everything on Earth, everything ever observed with all of our instruments, all normal matter - adds up to less than 5% of the Universe. What's worse, even within that unrepresentative 5%, modern physics has shown us that atoms are not all that solid and consist mostly of empty space. Yes, there are explanations for the solidity, but they are, at the moment, our best guesses as to how things work. And that is fine.

There is nothing wrong with best guesses as long as we don't forget that's what they are: guesses. Too often, though, we simply forget, or we convince ourselves that what we experience as reality is reality as it really is. On the one hand, that helps get us through the day without major inconveniences and injuries, but on the other hand, it gets in the way as soon as we have no more stones to kick. At least this is the case with our experience of natural phenomena. Our experience of reality, in other words, works just fine and it only becomes problematic when we think that our experience is the only valid experience. Quite often it is not only helpful, but illuminating, to seriously exchange experiences with others. More often than not, we end up realizing that we have more in common than separates us.

What works for natural phenomena becomes more difficult when we're dealing with human phenomena; that is things that people do and say. Just this morning I read that Trump's newly fired campaign manager laundered his ill-gotten (or not properly reported) gains through a Washington lobbying firm with close ties to Clinton. And though underreported at the time, it is now fairly clear that Trump and Bill Clinton had a nice chat very shortly before the Donald decided to make his presidential bid. It would seem there's more empty space in a hydrogen atom than there is between the two separate parties vying for the world's allegedly most powerful office. The dismay I expressed a couple weeks ago seems somehow justified.

This isn't the only example of things not really being the way we are led to believe they are. In fact, it would seem that most of what we're being told, at least on mainstream and quasi-mainstream media is less news than it is ... well, for lack of a better word, propaganda. Personally, I'm not at all pleased with this development, and I'll be the first to admit that trying to find "real" news, or the "true" story (by which I mean the one that simply corresponds most completely to all known facts, or sometimes even "fairly reliable news" or an "insightful" story demands more time, energy, and effort than most of us can reasonably be expected to expend. It shouldn't have to be so hard to figure out life in this day and age, even if most of what I'm forced to hear about day in and day out is rather far-removed from my everyday reality.

The above is simply an example. I'm not condoning nor condemning. I'm convinced that everyone involved in every single aspect of this latest political mess believed that they were doing what needed to be done and that they believed their reasons were both reasonable and worthwhile. Once you take a step back from it all, however, it all looks pretty sleazy and messy, and, ultimately, extraordinarily dangerous and deadly, but I'm not convinced there's a secret cabal (the notoriously infamous "they") who are out to get us. By the same token, I don't think it's unreasonable to think that Clinton and Trump have much more in common with each other than either (or both) of them have with me, and I don't think it would difficult to make the case that their interests are very different from mine.

Now, don't get me wrong: it's not that I think that either of them, or any of those inside our outside the spotlight of political activity is reasonable or even respectable. I have -- for as long as I can remember -- had an intense suspicion of anyone who maintained, directly or indirectly, that s/he knew better what was good for me than I did myself. Those who on occasion did -- my parents, for example -- just didn't tell me that they knew, they demonstrated that knowledge, they kicked stones. And so, now in my old age, if you're just telling me, not showing me, well, then you're just spouting hot air, and I needed take that too seriously, unless you're spewing so much of it that it's contributing to global warming and then I'm forced to get involved.

Who knows, perhaps some of those humanitarian interventions we hear about all the time aren't really so humanitarian after all? Could it be that national and foreign policies are more often driven by desire for profit than a desire to help? Is it possible that some of that providing support for democratic forces elsewhere is a mere distraction from the destruction of democratic inclinations at home? Could it be that most of what we're being told simply doesn't square with most of what is actually being done? I have a rapidly growing suspicion that there is increasing disconnect between words and deeds ... not just in America, not just in Germany, not just in the corporate world, but everywhere I turn. There is a whole lot of illusion out there, that's for sure. It could even be that when we're dealing with human phenomena, illusion is the best we can hope for. I don't necessarily want to think that, and I'm pretty sure that isn't the case, and one thing is certain: that's not necessarily a comforting thought.

And so, once again, I find myself in a situation in which, like I argued a few posts ago, you just have to let go. When dealing with human phenomena, it could very well be that taking the old adage, actions speak louder than words, seriously may be the human equivalent of kicking stones. Maybe, just maybe, it's time to turn off the TV. Maybe, just maybe, it's time to put down that newsprint bludgeon you like to beat others over the head with. Maybe, just maybe, it's time to just let the yappers go on yapping and the screamers go on screaming. Maybe, just maybe, it's time to take a closer look at what the yappers and screamers are doing, and not just listen to what they're saying.

Maybe, just maybe, it's time to take a deep breath and a step back from all of that and allow a little common sense and actual experience back into your life. Kick a few stones, or maybe, just maybe, start thinking for yourself.

Religion's not the problem, zealotry is

As I said the last time, human beings are neither inherently good nor evil, and the world is in the shape it is because we have allowed it to be as it is. We have a say in how the world is. We don't take our own voice seriously, and more often than not, we believe things to be a certain way, when maybe they're not that way at all.

Our debate on terrorism, to take but one example, has turned into one of religious bigotry, and as is so often the case, those screaming the loudest know least about why they're screaming. We humans like to think we know a lot of things, but in the end, we know very little. We believe much more than we know and when we believe long and hard enough, we make religions out of things when and where we least expect it.

Sometimes it's more than worth the effort to stop believing for a moment, to take a step back and think, but even more importantly, reflect on why you think the world is a particular way. Serious reflection never hurt anybody.

Religion, believe it or not, is a good example, because it is the one subject the world over that you're never supposed to talk about in polite company. Why? Because it is very fundamental to how we understand the world to be, whether we are aware of what we believe or not. There's an old saying, "Feelings tell us what to think." And what we believe most often drives what we feel.

Since I'm going to be using the world "religion" a lot in this post, I think it only fair that you know what I mean when I use the term. Now, you can think what you want about Wikipedia, but given that I'm looking for a fitting description, not an authoritative statement, I think it's perfectly legitimate to draw on it in this case. The first paragraph on the relevant page reads:

Religion is a cultural system of behaviors and practices, world views, sacred texts, holy places, ethics, and societal organization that relate humanity to what an anthropologist has called "an order of existence".[1] Different religions may or may not contain various elements, ranging from the "divine",[2] "sacred things",[3] "faith",[4] a "supernatural being or supernatural beings"[5] or "... some sort of ultimacy and transcendence that will provide norms and power for the rest of life."[6]

The key is that religion is "designed", if you will, to help us understand why things are the way they are and why life is the way it is. The "system" side of it includes behaviors, practices, special texts, and societal organizations, among others, though we can agree that these are probably the most important aspects overall.

The nice thing about having such a comprehensive description is that you can apply it to any number of observed phenomena and ask yourself whether what you're dealing with could be considered, in this case, a religion or not. The results can be quite surprising.

Let's take something that's on a lot of people's minds these days: capitalism. Is it just a economic theory, or has it become more than that? Let's see:

It is certainly a "cultural system" (we love to distinguish us from them in terms of it). There are definite behaviors associated with it, such as reducing discussions to economic terms, making money the basis of all valuation, consumerism; and practices, e.g., speculation, stock-market activity, and marketing/advertising; and world views, for example, there is no such thing as society (cf. Thatcher on this one), or simply, there is no alternative. It has sacred texts: Smith's Wealth of Nations is comparable to the Old Testament; Friedman's Capitalism and Freedom, perhaps the New, if we compare it to Christianity. It has special, particularly revered places like Wall Street, the City (in London), and Frankfurt. It has a notion of divinity (the Almighty Dollar), sacred things (stocks, speculative instruments of all kinds not meant for the masses), and while it is silent on the topic of supernatural beings, it does like to think its principles describe the natural order of things. It most certainly, as attested to by its most ardent devotees, a "sort of ultimacy and transcendence that will provide norms and power for the rest of life". Capitalism has become, for all intents and purposes, a driving basis for all our lives.

Oh sure, there are branches and denominations here as elsewhere: different central banks can be seen analogously to the Papal See or prime archdioceses. Stock exchanges and bank headquarters take on the role of temples and churches, and stock-holder meetings rival the spectacle of old-time big-tent evangelists. I don't think it's all that far-fetched to maintain that capitalism has become a religion for many people, and probably more people than are willing to admit to it. That doesn't change the reality of the situation.

The things believed in are not any more substantial or "real", to use the everyday word to describe them, than anything any of the major religions have to offer. Buddhism has no supreme being and neither does capitalism.

The similarities go on: all major religions have "founders"; that is personages, mostly historically verified, to whom believers trace their roots, even though those individuals themselves are not adherents to the faith (i.e., Moses wasn't a Jew; Christ wasn't a Christian; Mohammed wasn't a Muslim, Buddha wasn't a Buddhist). And they have a variety of special figures (often termed "holy", though the Hebrew root of this word, QDSh, means, more or less, "set apart") who may be considered minor prophets, saints, or mere holy persons, like Smith (whom we mentioned), Ricardo, Malthus, Say, Marx (comparable to Lucifer elsewhere), Hayek, von Mises, and others. These are "authorities" in the ecclesiastical sense, not just in the literal sense, of the word. Depending on the flavor of your own belief they carry more or less authority of course.

I think I've made my point: We can think of capitalism as a religion. It is possible to frame the discussion such that we can expand our religiously based discussion of "terrorism" in a very unexpected direction, and one that would not be all that absurd. But, that's not where I want to go with this, nor is that where I need to go.

Buddhism, Christianity, Judaism, Islam, Capitalism ... in and of themselves, they just are. They are a set of beliefs, worldviews and practices, etc. that attempt to help us make sense of our lives and the world around us. They are -- and here I'll put it in very mundane, secular terms -- explanatory models of reality.

What is so fascinating about thought experiments like this one is that the deeper you delve, the more fascinating it all becomes. As long as I don't come up with the crazy idea that my way of believing and seeing the world is the only valid way of believing and seeing the world, we don't have a problem. All of these ways are seen for what they are: ways of believing and seeing the world, and in that moment, I can not only recognize and acknowledge that other way of believing and seeing, I have the wonderful opportunity to learn from that different perspective.

Unfortunately, that's not how we seem to function as human beings. Once we find a way that makes sense to us, we start thinking that this is the only valid way of seeing things, of understanding things. That step to exclusivity, to "only my way" is what utterly dumbfounds me. The borderline between a believer and a zealot is a very thin one, to be sure, and what I see is an increasing number of zealots. I think we need to be a bit more careful with our beliefs. Granted, someone who benefits -- or who believes they benefit -- from a particular way of seeing will be inclined to favor that view, but the fear that they have that perhaps taking another view would disadvantage them in some way can only be accepted if one plays through the possible scenarios in order to find out if the fear is justified. That, of course, takes time, energy, and effort, and who is really willing to sacrifice much of any of those these days.

It's not that ignoring them and falling back into one's own belief of correctness can't be accomplished without expending lots of time, energy, and effort. It's hard work defending one's views against others. Unless, that is, you happen to align yourself with a large group of other folks who have bought into the same exclusivity that you have. And that's where we are today. And, when push comes to shove -- and that's unfortunately what happens all to often: we start literally pushing and shoving ... then injuring ... then killing -- we pull out the miserable old might-makes-right stand-by, and things simply go downhill.

My point is that what we appear to be doing is driving the Devil out with Beelzebub. I purposely chose this particular approach via religion because it is religion that appears to be doing most of the driving of our thinking, and I think we're leaving a major player out of the game. In the end, we believe. We don't know, we can't prove, but we've been given the ability to think. I'd like to think we'll start using that ability more not less. And that starts when we become more reasonable, not zealous. My example with capitalism was to show that the frameworks and categories that we simply take for granted can be used to find meaningful avenues of discussion and exchange with others.

For the most part I can't help but think that we're all looking for the same things but have chosen very different words to describe them. Maybe the words aren't what really matters. Think about it.

There but for the grace of God ...

The events of the last week or so have brought out many folks' true nature. One of the (dis)advantages of being involved in modern, social media is that you get a glimpse of everyone's foundation of life. Oh, I know, this is not what most people think, but it is nevertheless what is. Even if I don't place a lot of faith in what people "say", since I'm much more concerned with what the actually "do", social media is one of those "places" where the "the truth will out" and what you post says more about you than you may like to acknowledge.

Most of my social-media "friends" are American, but not by much. The vast majority, of course, find their roots in the "West"; that is, western, post-Enlightenment, Judeo-Christian, ever-increasing secular culture. In short, they're "Westerners". This is not bad, in and of itself; indeed it is merely an observation of fact. What most of my friends don't know, or are not aware of, is that belonging to this particular group brings with it a number of significant advantages, and at the same time, a number of disadvantage as well. How could it be otherwise? After all, this is life that we are talking about.

Before we examine what these advantages and disadvantages might be, it would do us well to reflect upon how it is that we ended up here in the first place. I don't know about you, but I just "woke up here" one day. I mean, there came a time when I became conscious of the world around me, and, lo and behold, I was the first son of a striving-to-be middle-class family in the so-called richest (not to mention, freest and bravest) country in the world, at a time when striving to be middle-class meant something. To the best of my knowledge, I was not involved in that particular decision. It just happened. It was a purely random event. I had absolutely nothing to do with it.

Like I said, though, I was "lucky" by our Western standards. The family I grew up in wasn't rich, but we weren't poor. We always had enough to eat and my life was as good as free from crime and violence. I had lots of opportunities and I was able to take advantage of them. I believe, as well, that most of you reading this ... most of you ... had a similar experience, but not everyone, and certainly not everyone else on the planet. The vast majority of humanity doesn't have it nearly as good as I did. The vast majority. Their lives more likely resemble Hume's struggle of each against all, a struggle for survival, more often than not.

Why? Because they're ignorant, uncivilized savages? Because they are violent by nature and love fighting and killing? Hardly. Regardless of where I have been in this world, I have found that just about everyone I meet wants pretty much the same basic things as me: enough to eat, some family, a roof over their heads, some time to spend with others, a feeling of security and to live their lives in peace.

What we fail to remember, what we love to repress is the simple fact that we were born where we were by the luck of the draw. Some lives have been easier than others, and most of you reading this, for all the pains and travails have had, by comparison, easier lives. I certainly don't begrudge what you have, but I do have a problem with you thinking that in some way you "earned" what you have, that you somehow "deserve" what you have. You were lucky. That's it. Damn lucky. For, there but for the grace of God ...

Paradox paradise

When choosing the lesser of any number of evils, aren't you are still choosing evil?

If "by their fruits you will know them", why is so much emphasis placed upon credos?

Can good guys be allowed (or even expected) to do bad things and still be good guys?

If G-d is the ultimate judge, why do so many of His followers spend so much time judging?

Why do alleged lovers of freedom coddle ruthless leaders who suppresses those in their power?

If you are sanctioned for exercising your rights, do you even have rights at all?

Did I miss a memo or since when is there such a thing as "good" (or even "moderate") terrorists?

Is stealing someone's heart a crime?

If gamblers are looked down on, why are speculators looked up to?

Why does Justice act like she can see even though we're all equal in the eyes of the law?

If truth is arguably relative, why do we argue about it at all?

How is it that might make right but right can never make might?

If knowledge is power, why are so many stupid things done in our name?

Given that certain truths are self-evident, why must laws be made to enforce them?

If actions speak louder than words, why do we put so much faith in what people say?

If you can't turn around, at least turn the wheel

Although I don't know how many times I have to say it before it becomes clear, it should be dawning on you -- even if ever so slightly -- that we can't go on with "business as usual", as if "business" were a good metaphor for anything.

The difference between what we say and what we do is huge. The difference between what we know would be good for us all and what we have is huge. The difference between what we believe and what is real is huge. The days of small-step changes are, well, for the most part behind us, if they even exist any more at all.

Don't you just hate it when that happens? Here we are, like frogs in the pot of water, thinking that things aren't as bad as everyone says and that with a tweak here, a small adjustment there; a declaration of commitment here and a gee-wouldn't-it-be-nice there; with a mere "return" to some odd values that were never actually there; well, then things would just be peachy keen and the world would be a nice place again. The water's boiling, however, and if we weren't frogs, our goose would be cooked.

But hey, as George Orwell once said, "In a time of universal deceit - telling the truth is a revolutionary act." And he also said, "The further a society drifts from truth the more it will hate those who speak it." George was a wise man, and insightful on top of everything else. No, don't get me wrong: I'm not comparing myself to him in any way. I think he got it, and I like to think I understand what he's saying. I'm not (yet) despised by many (OK, a few, but who isn't), and for the most part those who don't want anything to do with me feel that way for reasons much more personal than whether whatever I say might have some similarity with "the truth". Fair enough. What I am thinking, though, is that in these days and times, even looking for the truth is close to revolutionary. I've never really thought of myself as such, but with each passing day, I find myself closer than I would have ever imagined.

Revolutionaries are a strange breed, that's for sure. You've got your Lenins, your purveyors of the guillotine-driven French Revolution, the slave-owners-seeking-freedom types of the American Revolution ... hell, all advocates of violent revolution have been short-lived, ending up like the despots they drove out (the Beelzebub-Devil problematic, as I like to call it). On the other hand, there are the Mandelas, the Gandhis, and Jesus, just to name the most well-known, who knew that if you want real change -- even necessary change -- you've got to find it in yourself first. And who is really ready for that?

And that, dear reader, is the rub: Folks much smarter and wiser than me (e.g., Buckminster Fuller, Jacques Fresco, Jim Hurtak, Stan Tenen, Valentin Tomberg, Gar Alperovitz, E.F. Schumacher, Erich Fromm, Jean Gebser, just to name a few) have all made the case that any and all real change starts with ourselves. We can't wait for others to set the tone. We can't wait for others to show us the way. We can't wait for others to take the lead. We can't wait for others at all.

I know -- and believe it or not, I understand -- that not many of you are willing to (radically) "turn around". I wish you could, but I know that's expecting too much. Given that we now think what we've always thought, we've simply got just more of what we've always got. Nevertheless, you can make a start, and this start involves simply stopping to think what you think and take a step back to give it a good look-over. Regardless of how compressed time-frames are becoming, the least you can do is ask yourself whether there might be other options for a better future available.

I pledged but not necessarily allegiance ...

As I noted last time, saying the words is just a way of "talking the talk". The real test of anything we say is whether we're willing to act on it ... to "walk the walk", to keep in tune with the rhyming metaphor.

I know lots of talkers. Lots. At the moment we're talking about American talkers, but I'm here to tell you: mutatis mutandis (a Latin phrase that means, "all the relevant changes having been made") what I'm saying here applies everywhere else I've ever been as well, and beyond. Again, this is one of those cases in which my fellow countrypeople carry their obsessions on their sleeve, but they're really not as exceptional as they might like to think they are. No, what I'm looking for are "walkers": people who are willing to put into practice what they preach, folks who are willing to do, not just say.

Even once we get past that swearing-one's-allegiance-to-a-piece-of-cloth thing and leave the realm of the actual for the more ethereal realm of the possible, what does this "oath" require? Assuming that the sayers are serious about that "one-nation" stuff, how long does it take for it all to break down? Two more words, as Fate would have it.

The original pledge, written by a fascist-friendly Baptist pastor who wanted to have it said with right arms extended forward (yes, as in "Sieg, heil"), didn't include the "under God" part. That was a 1954-we've-got-to-distance-ourselves-from-those-atheistic-Commies addition. If it's included, what does it mean for Americans today? If it's an essential or mandatory part, then, quite simply, no atheist, Buddhist, Hindu, Shinto, Taoist, and, conceivably, Moslem (though the stretch is not far) can say it in good conscience. I don't know how many of these there are in America, but it's more than a handful. There are those who insist that the phrase be included, even if it excludes so many fellow "patriots". Personally, I think we can leave it out because it wasn't there to begin with, and since the Commie threat has passed, it's doubly unneeded, but that's just my own little view of things.

No, what interests me more than anything else is what follows, that short little phrase, "indivisible, with liberty and justice for all". When I look across the Pond these days, I see anything but something "indivisible": right and left, Democrats and Republicans, gun nuts and concerned citizens, North and South, East and West, the racial divide, and the treatment of immigrants -- just to name the most obvious -- point to anything but indivisibility. Which talkers are doing anything about that?

The very last six words, though, are the killer: in a country that recognizes "affluenza" as a disease, that has a disproportional number of minorities in prison, most often for negligible offenses, that has the starkest income inequality in the Western world (and is in the top 3 worldwide) and that is home to the Patriot Act, the NDAA, the CIA and NSA, that has the most militarized police force in the "free world", well, I have to ask myself, what are the pledgers doing about this?

It doesn't take a genius to figure out that all those "rising to defend the pledge" are actually just doing their part to ensure that nothing about it holds true. It's just so much hot air. What we should be doing is protecting and helping the weak and maligned, seeking ways to come together, and speaking truth to power. But we're not. We're wishing for the "good old days" that were never really good, and are nothing but old.

The way out of the darkness is not behind you, it's in front of you.

I pledge allegiance ...

These are the opening words of a statement than every American school child was expected to render each and every day of school at one time. It probably persists today, but I don't know, for I'm not there. What I do know, however, is that more than just a few friends of mine bring it up again and again (on Facebook, for example) and there is a strong feeling that it's not being pushed hard enough.

It is, therefore, time to take a look at this pledge and ask ourselves just what is being said, and, in addition, whether we should be pledging it at all.

Note bene: for my non-American readers, this is an exercise in examining something Americans think is important. Consider it a lesson in cultural studies, or Landeskunde, as my German friends would say. In the next post, I'll take another look at it from a broader, more inclusive perspective.

The pledge, as originally written, is as follows:

I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation [under God] indivisible, with liberty and justice for all.

First of all, a flag is a piece of cloth, in most cases, and it is, at best, a physical representation of an idea or an ideal. It doesn't matter which. What we find, first and foremost, however, is an oath to a mere piece of matter which has been, somehow, in some inexplicable way, be endowed with almost religious significance. Immediately, though, we are informed that the same degree of devotion, of submission, is to the republic that the flag is meant to symbolize, namely the USA. This entity is then described as a singular, united, unified "nation", which as of 1954 by legislative decree is imbued with divine oversight, that ascribes to and practices "liberty" (freedom in a political sense) and "justice" (equal treatment before the law) for all.

It's a nice sentiment, but is it applicable? When the pledge is expressed, it's a matter of "talking the talk". But, putting it into practice would be a matter of "walking the walk". But that's a topic for next time.

No, at the moment the question that is plaguing me, is how so many people who either believe or would like to believe that the United States was founded on sound, Christian principles, reconcile this pledge with their beliefs. Think about it:

1. There are numerous places in the Bible, especially the New Testament, that strongly indicate one shouldn't be swearing oaths.
2. While it is on the surface, at least, a pledge, it certainly sounds like an "oath", especially when you consider what the law proscribes for desecrating the symbol, let alone the "republic for which it stands".
3. The discrepancy between what it describes ("liberty and justice for all") and what is reality (one of the greatest disparities between rich and poor, the inordinate number of people of color who receive harsher punishments, even for lesser crimes, the repeated attempts to modify, say, voting laws to discriminate against those same people of color, the drastic differences in adjudication between "those well off" and others (e.g., "affluenza")

I have to wonder about how people get these things together in their minds. For the moment, I think it's enough for you to think about.

Yes, this is the pledge that many, many Americans hold to be sacrosanct, but before we even look at it in a critical way, questions present themselves that every one of us should be required to think about seriously.

Americans aren't the only ones

Although "nations" are a rather recent phenomenon on the world stage, there is no dearth of supporters who wouldn't trade them for anything. Americans are right at the top of the list, but a lot of others, like Russia, China, a couple of the Southeast Asian group or a few in Africa would like to get in on the deal. I don't know what the fascination is to be honest, just what is it that makes them so desirable?

A lot of you don't get the reason for the question. It's quite clear that we've had nations forever and it's as natural as four seasons in some parts of the world or rain in spring (if you're from the Northern Hemisphere). Actually, prior to 1648 and Treaty of Westphalia, there weren't ever really "nations" in our current understanding of the world, but, hey, why should we let historical facts get in the way of our beliefs? Life is certainly easier when you just pick and choose what suits us rather than getting the bigger picture. Why we have border where we have them or whether they make sense, well, those are issues that have been decided, of course, so there's no need to worry our little heads about them. Or is there?

In the Western Hemisphere (a rather artificial construct, if I may say so) 1776 is a year worth nothing. In the Eastern, however, it's 1789. In both years, revolutions took place and both these revolutions had a significant impact on everything that followed. The former was a conscious (even if perhaps, unnecessary) decision; the latter, a spontaneous act that developed into something that no one foresaw. This raises a question whether revolutions are a matter of choice or fate. I don't know. What I do know, however, is that some folks peg their beliefs on the one, while others will tell you it was the other date that matters. It really doesn't matter at all.

Sometimes I think that the petty and silly animosity between Americans and the French is about who had the "real" or the "true" or the "better" revolution. Depending on who you are reading, one year or the other can be used as marking the shift of humanity into "modernity". Whoopee. So far, no one's been able to make clear to me why that makes any difference at all.

When we look at the facts, we're left with this: a lot of violence occurred, a lot of blood flowed, a lot of innocent people suffered, and a lot of misery was visited upon the participants. In the decades that followed, a lot of violence occurred, a lot of blood flowed, a lot of innocent people suffered, and a lot of misery was visited upon those who benefitted from the "revolutions". And for what? For me, that's the key question.

The reasons for both were more similar than different: injustice, be it because of taxes or the simple ability to feed one's family. The results of both were more similar than different too: a different group of oppressors took over, a lot of people had to pay taxes and couldn't feed their families, and we have a different illusion of what our role is in the grand scheme of things.

Don't get me wrong, there are good things that came out of both. But ... are we moderns really better off than those revolutionaries. I often wonder.

You may find out anyway

Not knowing or not wanting to know ... looking life in the eye or burying one's head in the sand. These are commonly accepted options. Unfortunately -- or fortunately, depending on how one looks at it -- these aren't as clear-cut as they once were. Oh sure, there is no shortage of indivduals who would love to just close their eyes and make it all go away, and not being able to do that, they tune into their favorite propaganda/news channel and simply see and hear what they want to anyway. As we saw last time, we do it in regard to the past, so why not also in the here-and-now. I hate to be the one to break it to you, but this approach is getting less effective each and every day. You're probably going to find out what's going on anyway.

It's getting harder and harder to keep a secret, have you noticed? President 29 (Harding) fathers a child in the broom closet of the White House and writes heavy-breather letters to his mistress and who knows about it? President 35 (Kennedy) turns out to be quite the ladies' man and when did we find out about it? Sooner than we found out about Harding. President 42 (Clinton) gets frisky in the Oval Office and the torches and pitchforks are out because we know about it while he's still in office.

We suspected for years that "Big Brother" was watching us, and the reaction the Manning and Snowden revelations unleashed was so strong because no one had wanted to believe that it was as all-pervasive and detailed as it is. This particular issue is complicated by the fact that Americans -- not exclusively, but in particular -- are not so sensitive about such things when they are happening to others (What's the big deal about tapping Merkel's cell?) but are overly sensitive when they are affected themselves (What do you mean they're listening to my phone calls?).

The point is that everything, sooner or later, gets out, becomes known, is revealed. The Internet never forgets. Sure, technology has made all this more possible, but it's not the only reason that we get access to more than we sometimes want to know and it becomes increasingly difficult to keep anything to oneself.

The flip side of this is, of course, that there in an increasing amount of information we're not allowed to keep to ourselves. Apply for a mortgage or any significant loan. Get yourself a passport. Gee, get on an airplane and have yourself scanned. For Americans, who are most often content telling a commercial enterprise anything they want to know but get freaked when we find out it's the government, this may all seem normal. But, for Germans, just as one example, the notion of the "glass citizen" (der gläserne Bürger) is somewhere between disconcerting and downright frightening. By contrast, they may be willing to tell the government more, but they get very, very uneasy when this information gets into private hands. And rightfully so. However, the ability to restrict the divulging of information, the capability to protect one's personal, private sphere, is becoming ever more difficult.

I know, I know ... all of you are perfectly honorable, responsible, and open individuals who have absolutely nothing to hide. That may well be, but that's not the point. The downside is that not everyone who has access to you will treat you as such. The more of us that's "out there" is all the more over which we have little influence and absolutely no control. At what point does our publicly available self become "more real" than our own private person?

This is not only something to think about, it is something you need to think very deeply about. And, if nothing else, it is something that we certainly need to become more aware of.

Tomorrow's Bastille Day

Tomorrow, though most of my francophobic (Freedom fries?) countrypeople don't know it, is Bastille Day. This is the French equivalent of America's 4th of July: a great day for praising one's own greatness (which the Grande Nation is very adept at, like their American cousins) and for celebrating one's accomplishments (even if they are drenched in blood). More than anything, it makes a great day for flag-waving. That makes July a pretty red-white-and-blue month, I suppose.

Far be it from me to pick on the French. Even they don't necessarily want to speak English when I'm there, and even if they do frown upon my speaking German, I like France; I particularly like Paris, Bordeaux, and Avignon, where I have been fortunate enough to spend more time. No, the French, as much as anybody, perhaps even rivaling Americans, are deeply imbued with that, as Einstein called it, "infantile disease" called Patriotism.

As I pointed out just a few posts ago, Americans may be suffering from a terminal case of the disease, but the French are not far behind. There are lot of others, like the British, the Dutch, the Russians, the Chinese, just to name a few, who are not far behind. Like I said then, I don't get it. I just don't understand it. There have been a lot of disastrous things happen in the course of human history, and most of them have been perpetrated either by religions or countries (or what we, in retrospect, call countries or nations). Whatever truly great things that have happened in the course of human history, like the mastery of fire, the discovery of the wheel, the finding of a cure for some terminal disease, have all been done by individual human beings (with the huge support of other human beings from other countries and other cultures). It's not the country that makes the difference, it's the person.

When you look around you to see what is great about the world you live in, you'll always find that, first and foremost, it was brought to you by another person. People matter. Not organizations, not localities, not tribes, not regions and not countries ... people matter. I don't know why that is so hard to grasp, but apparently it is.

The real difference, in my mind, between people and countries is simple: people are here now; they are with you; you can feel, smell and touch them; they are real and concrete. Nations, on the other hand, are mere abstractions. They serve their purpose, to be sure, but it is a small purpose in contrast to what another human being can do for you.

Think about it.

A slight digression to nowhere

One of my favorite writers is Erich Fromm, not necessarily because of his style, but because of his insight. A supposed-to-be rabbi who decided instead to become a Freudian analyst ended up becoming one of the most perceptive and prolific social psychologist of the 20th century. He was a man who not only loved people, he was concerned very intensely with their mental health and well-being. Like most "prophets" he was certainly more ignored than accepted, but that does nothing to diminish his relevance. Recently, I stumbled across a typical example of his insight that got me thinking. In a discussion of "alienation", he wrote

In the alienated form of pleasure nothing happens within me; I have consumed this or that; nothing is changed within myself, and all that is left are memories of what I have done. One of the most striking examples for this kind of pleasure consumption is the taking of snapshots, which has become one of the most significant leisure activities. The Kodak slogan, "You press the button, we do the rest," which since 1889 has helped so much to popularize photography all over the world, is symbolic. It is one of the earliest appeals to push-button power-feeling; you do nothing, you do not have to know anything, everything is done for you: all you have to do is to press the button. Indeed, the taking of snapshots has become one of the most significant expressions of alienated visual perception, of sheer consumption. The "tourist" with his camera is an outstanding symbol of an alienated relationship to the world. Being constantly occupied with taking pictures, actually he does not see anything at all, except through the intermediary of the camera. The cameras sees for him, and the outcome of his "pleasure" trip is a collection of snapshots, which are the substitute for an experience which he could have had, but did not have. (p137)

In my humble estimation, he hit the nail on the head, then; and I wonder what he'd have to say about selfies today. Whereas once we allowed the gadget to do our seeing of the world for us, all we see now, it seems ... and this through an intermediary ... is ourselves.

Is this because we think too much of ourselves, or is it perhaps because we have lost ourselves completely?

Reference
Fromm, Erich (1955) The Sane Society, Holt, New York

Banking on an apology

In all fairness, I think I owe any of you who actually read (and even tried to understand) the last 10 posts an apology. No really.

How utterly boring was that? Honestly. What amazes me more than anything else - well, other than I wrote it, and more so that some of you read it - is that it was that we exchanged our society for this: an illusory lunacy, full of lies, deceit and dishonesty, leading only to so-called material wealth (in this case, money), and for this some folks are willing to not only lie, cheat, and steal, they are ready to kill and maim as well.

You think I'm joking?

You may not know anyone personally -- or maybe you do -- who lost so much in the crash that they threw themselves out a window or chomped down on a gun barrel "inadvertently" pulling the trigger, but there are people who did just that. There were people who simply lost their homes, were thrown to the wolves on the street, who are now living in a tent city or under a bridge, who may have caught an incurable illness as a result. Hell, there are people with major health issues now who can't afford insurance or care, who worked hard all their lives and have a mere pittance to exist on now that they are old and unproductive and have been more or less thrown on the scrap heap. Societies, at least in principle, represented morals and values and discussions were conducted against a backdrop of what was reasonable and desirable for everyone, for the community-at-large. Economies have no room for values, morals, or - heaven forbid! - concern for the well-being of others. Economies are simply about money, no more and no less.

Societies were composed of members; economies are composed of competitors. And even though we don't like to, and try hard as hell to, avoid thinking of it that way, that is also part of what it means to live in a world in which money is simply more important than people and a few choice legal rights are far more important than any human rights will ever be.

I say the world we live in, because it's just the space in which we find ourselves, it's not a society. At least not anymore. I suppose it could be, if we wanted it to be, but I really don't see a lot of indication that that's what's on the horizon.

Through a gla$$ darkly X

In capitalism, risk is supposed to be borne by the actor. In this recent case, the risk was private, but the loss was made public. This is an aberration unheard of in the annals of finance. What is more, it was institutionalized, made policy, expressed as the truth of the realm, but in fact, all of the rules were changed to suit the Wizard and the rest of us were literally left holding the bag.

In my day, people taking risks were considered gamblers, and gamblers did not have much of a reputation, well, at least not a good one. They were most often considered greedy, dishonest, deceitful, and unreliable. How is it that we turned the gambler into the pillar of society. I'm sorry, but I just don't get it.

I have nothing against capitalists in principle, as long as they play by their own rules, take their risk and losses like mature individuals and demonstrate by their own actions and behavior that they understand which world it is in which they operate. But, they have made their problems into my (and your) problems, and they have convinced the powers-that-be that it is only good and right and proper that the rest of us should not only pay for their mistakes, but that we should reward and continue to honor them because they are the rich, the powerful, the masters of the universe, the best and brightest ... which they aren't, never had been, and never will be. And that's, quite frankly, what turns my stomach every time I hear or see others fawning over them, kow-towing to them, catering to them and their wishes, believing their lies, their deceit, and never, ever questioning what they are doing. Why? Because for the most part, we have been repeatedly told that we can't understand this highly complex, if not complicated, world of modern finance.

Really?

Don't get me wrong, I don't claim to know all the ins and outs of the details of all the nonsense that they perpetuate, nor do I think it is necessary to do so. What we need is a basic understanding of how "the system" works so that we can recognize them for what they are: gamblers, and gamblers who play with other people's money. Your money, my money, pensioner's money, anybody's money but their own. And that simply has to stop.

The system they created isn't really much of a system, it is a shell game, a sleight-of-hand act, an illusion. We need to put some reality back into the system and they need to be put back in their place. As long as we can't, or won't, acknowledge the reality behind the illusion, they can continue to act as badly as they have so far and we will continue to be victimized by them and their elected henchmen.

At that moment that we traded in our society for a mere economy, we placed money (and property) rights above human rights, we made money the measure of all things, including ourselves. I'm not convinced that was a good idea. When the good St. Paul was writing his letter, he was, of course, talking about a different kind of salvation, but if we want to save ourselves from this nonsense, we need to understand what is going on, or as Paul put it "see [things] face-to-face"; that is, see things for what they are. It's not rocket science, it is business, it is a little economics, and it should be a whole lot of common sense.

It's time to expose the man behind the curtain.

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly IX

What happened in the run-up to 2008 was seen by everyone involved. Anyone who tells you differently either doesn't know or is being disingenuous. Anyone who has the slightest understanding of how banks work, both commercial and speculative could see that what was being done was neither wise nor prudent nor even truly worthwhile. It wasn't going to benefit anyone but the slickest and quickest. And when the house of cards fell, the Grand Capitalists stepped forward with the cry, "But, we're too big to fail!". And most everyone believed them (Iceland is a notable exception). What to do, what to do?

If anyone has been following even casually, it does not take much to understand that the "size" of these institutions; that is, the size of the numbers on their balance sheets, was in most cases hopelessly and shamelessly inflated. In terms of actual value, most of it was made up. We like to think that financial instruments are backed by something real (a car loan with a car, a mortgage with a house, money by gold or the like), but the truth is they aren’t. The so-called "value" of all the bundled paper at the time of the "crash" was six times the world gross product.

A national or regional or even world gross product, it will be remembered, is the estimated value of all the resources, products and services in possession of or produced by a given entity. In this case it was the world and the paper was "worth" six times everything the world can do. I'd say that is just slightly absurd, and to act as if it that "value" (of the paper) is "real" is patently absurd. These institutions weren't any bigger than the legendary Wizard of Oz. It is known: Beware of the man behind the curtain.

To add insult to injury, this fiction of "value" was treated seriously and the most basic rules of capitalist economics were ignored. You will recall that riskier investments (e.g. a loan to a first-time home-buyer) often carry higher interest rates than well-secured or trusted loans. That's why local banks were once more successful, for they could better estimate their degree of risk. That risk, of course, was expressed in terms of interest rates. The higher the rate, the riskier the investment; that is, the less likely it will turn out.

So, if I can buy a savings bond that will yield around 1.75% interest, I can buy a similar Greek bond that will (possibly) yield (on average over the past 15 years) 7.7%, well, yes, I perhaps stand to make more money by "investing" in Greece, but there is equally a greater chance that I won't earn anything at all. Some people like the increased risk (you have to bet a lot to win a lot), and I suppose they should be allowed to play that game. But, I also believe that they should play the game, and I should have nothing to do with it at all. The speculator's losses shouldn't be my losses. But that's what was done to the rest of us. Exactly that.

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly VIII

Picking up where I left off, in my bank, some of the loans that I have made are good, sound, loans. Some are, for whatever reasons, a bit of a stretch. Perhaps the people will lose their jobs when the factory shuts down or someone with a loan gets ill and loses their job for that reason, or perhaps someone simply misjudged the reliability of the loan recipient and it doesn't look like the bank is going to get their money back. In the traditional system, the good loans offset the bad ones and the trick was to make as few bad ones as possible. Now, however, we have other possibilities.

Let's assume that Mary, one of the bank's new employees, has a brilliant idea. Why not take some of the good loans and some of the bad loans and wrap them all up in one single bundle. You then get a rating agency to give it a AAA stamp-of-approval and then you simply sell the whole bundle to someone else for some set price, a price that is perhaps lower than the whole bundle if counted individually, but more than if the bad loans in there didn't get paid back.

You have two advantages: first, you are rid of part of your risk, and two, you have immediate cash in hand to turn around and loan out or invest and not have to wait until all the individual payments from all those individual loans come trickling in. And that's what they started to do, in various ways, with various colors and variations and who knows what all, but pushing these bundles of paper around – which are, it should be noted, a "derivative"; that is, an "investment" that derives from other forms of investment – becomes so popular and so many folks are getting used to speculation of all kinds that before long side markets show up where these things are bid upon, traded, exchanged, and who knows what else and everybody is just have a grand old time making up such derivatives and finding others who are willing to buy them or bid on them.

Again, it doesn't take a genius and just a moment's reflection reveals that the value of these bundles is pretty fictitious too. All of sudden there are bundles upon bundles that are bigger and bigger and all of them are "safe" because they've been rated safe, which increases my safe capital in my own institution, which means I can loan out more money and make more investments to grow and grow and grow and get richer, richer and richer. The only problem is that deep down beneath all those levels of paper and in spite of all the creative ways of accounting for these "instruments", as they were called, there's really nothing real at all. The "value" and the "worth" of any individual bundle was not the same. The bundles were once backed by whatever those bundles represented but once bundles were bundled and further bundled – the process can theoretically go on indefinitely – well, if you ask me, it all just starts getting absurd. One day someone is going to wake up, realize they are being sold a bill of goods and the house of cards could come tumbling down.

Welcome to the financial crisis of 2008.

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly VII

The fact that Tom now owns the shares, not the company, is the point, unfortunately, that most people miss. The issue company only has so much to do with its stock as it is concerned to keep its value reasonably high, but this is more for image than financial reasons. People who buy and sell stock do so to make money. Anyone who "plays the market", as it is most accurately described, buys stock in the hopes that the price will rise so that they can sell it later for a profit.

In other words, the company should do well enough that the share price rises so they can make money. Since the issuing company's only obligation is to increase it's share price so that others can generate income, it is not truly accurate to call the stock buyers "investors". They aren't investing in the company, they are investing in themselves. Technically, the shareholders are "owners" but for the most part they are only concerned about the share price, not the working conditions, the employees, the customers, or the products or services themselves ... or only insofar as these things have a positive influence on the share price.

The stock market, then, is really more like a casino than an investment, as one chief financial officer told me. What amazes me the most, though, is the amount of media coverage this particular casino gets. Fluctuations in the stock market are more often than not market players' emotional reactions to all kinds of events, but not really a sound indication of the health of the economy. I don't think it's ever a good idea to take your temperature in a casino.

It doesn't take a genius to realize that the kind of person who does well in prudent investment and helping local enterprise get along is really not the kind of person who does well in the rough-and-tumble world of speculation. There was a time when the government saw to it that these two realms remained separate. This was way back in 1933 when the so-called Glass-Steagall Act was passed and signed into law. Its real name was the Banking Act of 1933, and it covered a lot of territory, but for our discussion here, it separated commercial banking from speculative banking. Over time, of course, lots of folks started thinking this was old-fashioned and during Clinton's second term that was stated so definitively, in terms of the Gramm–Leach–Bliley Act of 1999, which repealed the affiliation restrictions that Glass-Steagall had imposed.

It will be recalled that back in Through a gla$$ darkly IV it was shown that a bank can only lend out (or invest; that is, put at risk) about 10 times what is has "safe in the bank". Another way of saying this is that it essentially lends out (or invests) the same capital multiple times. The trick comes when we ask ourselves what is "safe in the bank".
If a bank has ∆1,000 "safe in the bank", it can loan out or invest up to, say, ∆100,000. Some of these loans – like we described in our examples then – are relatively safe. And, if the bank lends out, say, ∆1,000 at 5% for a year, it will get back – if all goes as planned – about ∆1,020 at the end of the year (it's actually slightly more but for the purposes of illustration here, inconsequential). In other words, it lent ∆1,000 but the "value" of that loan is ∆1,020. This is to say that the value of the bank is equal to what it safely has and what it expects to have at some point in the future.

The important point here is that the bank's value is actually a fictitious number. It's not real like the ∆1,000 upon which it bases its business is real. The art which allows us to keep track of such things is, of course, accounting. Or, as I like to say, it is not "counting" but "a [that is, one particular way of] counting, but that, too, is another story. But now that the door is open for all kinds of real, kind-of-real, and even imaginary things to happen, since commercial banks may now also speculate, let's take it all a step further, next time.

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly VI

Let's start with borrowing since it is the most familiar to most of us. You go to a bank (usually) or other financial institution (could be a credit union, or Aunt Marge) and you negotiate a sum to be paid back over a specified period of time, and at a certain rate of interest. The riskier the bank feels this lending is, the higher the interest rate you end up paying. (It was once rating agencies which made such decisions, but they managed to tarnish their own reputations lately.)

The second way is to beg. Actually, the organization itself offers promissory notes (in everyday speak: IOUs) called bonds. The organization is, within certain limits of course, free to say when and how the bonds will be paid out, but there are several agreed on standards. Perhaps the most commonly known type of bond is the savings bond. When you buy a bond today for $37.00, in seven years the government promises to pay you back $50. The organization is basically saying, "trust me", and if you do, you can lend it money.

Whimsical as I am, I listed "stealing" as the third way, but that's obviously not 100% accurate. The third way of generating cash is to issue shares of stock. These shares represent ownership, so the percentage of shares you hold determines your "share" of the business. Such an issuing can be private, that is, you offer a part of your business to someone else and you negotiate between yourselves how many shares and what they are worth. We don't often hear about these kinds of transactions in the news. But, such offerings can also be public. These are the infamous (if at times not notorious) IPOs or "initial public offerings" that get lots of media coverage if they are big enough. In this case, the company decides to sell shares of ownership to the public, in the hopes that the demand for the new stock will raise the share price and thereby generate more cash.

A few years ago, a German low-cost airline went "public" and sold €1,000,000,000 worth of stock on the first day! Not bad, eh? But this is where the "stealing" comes in. They didn't take all that cash home with them. After paying fees and premiums and costs for staging the sale, they had a mere €400,000,000 to take home. I don't think it is out of line to wonder why the people who put on a sale earn more than the folks for whom the sale takes place, but that's another story.
What's worth noting, though, is that this is a one-time deal. Once those shares are in the public domain (on the stock market), they can be bought and sold and speculated with and the issuing company receives no money whatsoever when these shares change hands. If I buy some stock at the beginning, then the company takes home some of that money. If I sell them to my friend Tom a week later, I get money from Tom, but I don't have to give anything to the issuing company. They don't own those shares anymore: I did, and now Tom does.

And why is this so important? I'll tell you next time.

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly V

So what did our example tell us?

A moment's reflection brings us to the realization that as long as everyone plays by the rules, there's really no problem. The bank "makes its money" by investing someone else's money (in this case its depositors') and earning a return (in the form of interest or value-appreciation of some sort), and the bank, at least ideally, then shares some of those earnings with the people who provide it with its resources.

You see, it's all actually very simple. But everything was simple in Leave-It-To-Beaver Land, and we don't live there anymore, in fact, we're not in Kansas anymore either.

There was a time – and there are some places – in which banking was a conservative, prudent, and cautious business. Banking was local for the most part. The bankers knew their clients, knew about their work and family relationships and assessed the risk of any of their loans, for example, based on this knowledge. A person with a steady job and without a lot of other debt was a pretty safe risk for a mortgage on a house suitable for his or her family. Yes, the house itself was used as collateral for the loan (that is, if you couldn't pay off the loan, the bank would end up with your house), but the bank really didn't want the house, it wanted the money you made in payments. Why? Because it could take that money that you paid in an loan it out to other loan seekers, or invest it somewhere they could expect a reasonable return. The key to the whole system was reason: the bank knew its customers, knew its strengths and weaknesses, knew its capabilities and acted accordingly.

All the while, outside the banking system as just described (in the last couple of posts) – the commercial banking system, there was another system for another set of clients and customers. This was called investment banking. Here, the stakes were higher and the returns were higher. It's called investment banking, but it really isn't investing in the same sense that we might have put our money in a savings bond or such. No, here more volatile things were involved: stocks and futures (the infamous "pork bellies" one often heard about), and more. Here, however, I need to make a small detour before moving on.

In the world of business, there are three ways for an organization to generate extra cash. Extra? Yes, that is, money that is not generated through regular operations. Money the organization wants to invest. We all know that it is wiser to save up for a large purchase before buying it, but in the go-go-go, consumer-driven world today, we too often resort to credit to satisfy our impulses. Some things, like a home, of course, are really too significant a purchase to save up for, but cars and stereos and smart phones and refrigerators are in fact manageable.
The savings of business are called retained earnings, and sometimes these reserves are not enough to finance the next step forward for a business, so they have to get the money elsewhere. The three avenues open to them are, as in everyday life, to beg, borrow or steal. Really? Let me explain what I mean (next time).

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly IV

In this happy little scenario, you will notice there is no speculation. People who knew other people lent them money because they were pretty sure they were going to get it back – yes, with interest, but that interest was modest and everyone ... the bank, the depositors, the borrowers ... all benefitted from the "system". And two immediate questions raise their eerie heads: why is the banking scenario no longer so happy; and just how is it with the bank and its ability to "invest" at all. Let's take a look at how this works, starting with the bank's ability to invest at all.

The astute reader, or anyone who has been following along, will recognize that the bank can only lend money if it has money to lend. In other words, as long as I, and my neighbors and other people in the community, bring our money to the bank, then the bank has money that it can lend to others. That makes perfect sense. We got interest on our savings accounts because we put this money at the bank's disposal, and we expected them to be prudent and reasonable in investing this in such a way that they would get a return and that they would share that return with us. The real question is, just how much money does a bank actually have to have and how much are they able to loan out to others? And this is where things start getting interesting.

Although it goes under different names and at different times was determined by any number of different formulas, for simplicity's sake we'll just call it the bank's capital requirement. Not all capital is cash, and some non-cash capital can be relative risk-free and other may entail a lot of risk. While the requirements have changed, for example from the so-called Basel agreements (we're at Basel III now), at present you only have to have about 8% to 10% capital "in the bank" at any one time. So what does this mean? Well, in simplest terms, you and me and Joe and Joan down the street may have our savings in the bank, and the bank itself may be well-capitalized and be holding at around the 10% level, but all that means is that they have about 10 times more "out and about" (invested, loaned, whatever). A simple example can help make this clear:

Let's say a bank has 1000 units of whatever as their way of meeting the 10% requirement. (You can think of these units, which we'll call ∆ for lack of anything better at the moment, in terms of singles, tens, thousands, millions of whatever; it doesn't really matter.) Mrs Jones needs a small-business loan and the bank lends her ∆500. Mr Smith wants to improve his house and gets a ∆250 loan approved. Acme Products needs to make payroll and wants a short-term cash injection of ∆1000. The bank has invested as well, say, ∆10,000 in various securities (bonds, treasury bills, etc.), and the list goes on and on. Simple arithmetic reveals that the bank has already used more "money" than it actually has (i.e. ∆11,750) but it can continue doing this until it reaches its ceiling of ∆100,000 in total. Of course, everyone (or almost everyone) to whom the bank makes a loan makes periodic payments and the total of those payments will be greater than the sum loaned out because the bank in charging interest on those loans. Not everybody who has money in the bank will want their money all at the same time – generally speaking – and so the bank is safe, so to speak, in lending out more than it actually "has".

Note: This series was originally published in slightly modified form on the Daily Kos.

Through a gla$$ darkly III

What is a bank? Silly question, is it not? Maybe, but I don't think so. There was a time when many of us knew (or thought we knew) what was meant when we used the term, but times (and conditions) have changed. Let's take a walk down memory lane.

Believe it not, there was a time when I took my "extra money", that is, the money I wanted to save (to buy a house, car, go to college, etc.), to a bank and deposited it because they paid me to have my money there. I had a savings account and they paid me (at the time) about 4% compounded semi-annually, and I thought this was a great deal. "How and why could they do that?" was the question that I had then and the answer was actually very simple: they used my money to invest in "whatever" and they shared their success with me. What a lovely idea. Almost idyllic, isn't it? My question, of course, was "What do they invest in?".

It turns out that they "invested" in the local businessman: the accountant who wanted to stabilize his cash flow, the metal-shop owner who wanted to buy new machines and equipment, and more. They also invested in the local community: the homeowner who wanted a second mortgage to make improvements to his property, the first-time buyer who needed a loan to buy a new house, a family who needed a new car and didn't have the cash to put down for a new one. In other words, people just like you and me doing things just like you and I do. They charged interest on these loans they made, because there was a certain risk involved. What if the accountant lost his clients, or the metal-shop owner didn't get the new production contracts or the home or car buyer became unemployed and couldn't make the payments? The level of "risk" (real or perceived) determined the amount of interest that the borrower had to pay for the loan. Young people buying their first car paid higher interest rates than long-term employees of a local company. The home owner paid a lower interest rate on his second mortgage than the first-time buyer. There was something to back up the loan: the house, the car, the reputation of the borrower, his or her standing in the community. Most bankers knew who they were dealing with and how reliable they were. Still, the risk was covered, and if everyone made their payments, then the bank could pay me my bonus for letting them use my money in the first place: the interest that accrued on my modest savings account.

OK, OK, I know, the past was in Technicolor. Reality tends toward black-and-white. But, in reality, that's not true. It's more shades of grey.

And that's where we'll pick up next time.

Note: This series was originally published in slightly modified form on the Daily Kos.