Originally Posted By: Cheerio
Ohhh yes. "moving money around" to make money, without creating real wealth, can really only be done with fiat money.

I think its truedestructiveness is apparent when you look at all types of runaway debt- mortgages, student loans, credit cards- and the "soft taxation" of inflation. Since we have decoupled from gold all these problems have skyrocketed.

As i tell my students, money is magic, it only works because we all believe in it.


I think what sinij was referring to was the fact that in its proper form, venture capitalists/banks perform a vital service - they basically produce "opportunity". You have an idea/skill/successful biz/etc, the financial guys can give you an opportunity to create/utilize/expand/etc by loaning you capital to build/equip/hire/etc and be successful. In return, if it works, they get back more money that they loaned you.

However the way the system currently works, if you are ultra wealthy/connected you can form mini cartels with your peers and get the govt to directly or indirectly back/loan/give you cash in return for your political/financial patronage. This is not limited to political donations, but often even more complex schemes where for one SMALL example (out of many) the Fed (mentioned fiat currency) will print up cash to loan to say Goldman Sachs at 0% interest - and even pay a distribution fee to GS , that Goldman turns around and loans out for profit. Goldman might even securitize the loans, and sell them off. If it goes bad, Goldman just gets more free cash from the Fed and repeats the process until they can squeeze cash out of the transaction.

Goldman might also loan to various patrons of the system, who in turn do whatever with it. Since it was loaned to a shell/holding corp of various sorts not the patron directly, the patron typically just takes a portion in terms of fees/etc, and if the venture is unsuccessful then oh well. Often a patron will hand cash to a patron that hands cash to a patron , and somewhere along the line a buyer for whichever security/company/investment/etc will be sought after.. often giving the impression that it is a viable investment with committed funding if needed. Then the poor guy at the bottom of the pyramid finds out he was sold a turd, and no further funding is forthcoming.... unless of course they play ball with the cronies.

Since the Fed has no accountability they can throw money at already monied insiders, and can also include their friends and friends of politicians who might otherwise be for holding them accountable in the loop. Its a patronage system.

There is of course much much more detail and ways that the corruption occurs, but it really is a topic of research in of itself.

But I think this type of thing is basically the type of thing sinij was referring to, and if so he was 100% correct.


Last edited by Derid; 08/08/12 07:38 PM.
For who could be free when every other man's humour might domineer over him? - John Locke (2nd Treatise, sect 57)