A few weeks ago I blathered on about inflation, debt, interest rates and the grand-daddy of all conspiracy theories - Bankers Control the World!!!
To properly understand the Bankers Control the World!!! conspiracy theory the student theorist must first be comfortable with the concept of the Business Cycle...
The Business Cycle explained aka 'How to turn made-up money into tangible assets in 10 easy lessons...'
- Banks create lots of money out of thin air
- They lend that money to people at low interest rates
- Because so much money is pumped into the system its value falls
- Because money is worth less prices rise
- People have to borrow more and more made-up money from banks to pay those higher prices
- After a few years, banks hike up interest rates and reduce the amount of money in circulation by cutting back on lending
- Prices fall, as do many people's incomes
- The size of outstanding loans, however, does not fall
- People can no longer afford to service their loans and are obliged to turn their property and businesses over to the banks
- Repeat every 15-20 years or so
The terms 'banks' and 'bankers' are used very loosely and refer more to the people behind the banks and bankers than the banks and bankers themselves. We are, after all, talking about a hidden ruling reptilian elite
All of this Bankers Control the World!!! stuff, all of it, is insane nonsense, obviously.
For example, when faced with the news that house prices in London have risen by 22% over the last year and the average price of a home in London now stands at £366,302 (sorry, that was yesterday, it must be topping £380,000 by now) the delusional conspiracy theorist will blame the eye-watering price rises on cynical manipulation of the money supply by scheming bankers.
Whereas the clued-in people, the rationalists who really know how the world works, will know that high levels of property inflation are due to non-conspiratorial factors such as...
"Wealthy City financiers, foreign buyers and big income earners are driving the demand in London and with quality stock at an all-time low, there is an exacerbated effect on prices"
All very sane and rational.
Only a couple of problems though
First off, it's a matter of record that people are borrowing shit loads of money to buy property - not 'wealthy city financiers' or mysterious 'foreign buyers' but ordinary people being obliged to saddle themselves with buttock-clenching levels of debt to buy a home.
Second off, there's the small matter of the former Governor of the Bank of England openly 'fessing up and admitting that, yes, he and his buddies had deliberately stoked up personal debt and inflation to unsustainable levels...
"In the environment of global economic weakness at the beginning of this decade ... external demand was declining and related to that business investment was declining.
"We only had two alternative ways of sustaining demand and keeping the economy moving forward: One was public spending and the other was consumption.
"Now of course it's true that taxation and public spending may influence the economic climate, may influence consumer spending.
"But we knew that we were having to stimulate consumer spending; we knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term.
"But for the time being, if we had not done that the UK economy would have gone into recession just as has the United States.
"That pushed up house prices, it increased household debt ... my legacy to the MPC if you like has been 'sort that out'."
Or put another way 'Why have a recession in 2001 when you can have a full-blown depression a few years later?'
Or put another way 'We could have stimulated the economy by building infrastructure that would have served the nation for generations but decided to encourage everyone to go out and buy shit instead'
Or put another way 'Me and my mates decide the price of your house, your monthly outgoings, how much you earn, and even whether you have a job or not. And there's fuck all you can do about it'
And because ordinary people don't understand, haven't been educated to understand, how money works, bankers can pull shit like this again and again without ever being strung up from the nearest lamp post. Hats off to whoever figured this money-lending game out in the first place. He was a clever dude. Destined to burn in Hades for all Eternity, sure enough, but definitely clever.
The really intriguing part of this business is the fact that a lot of people are expecting, have been waiting for, the UK economy to go tits up - for years now. But, like the proverbial watched pot, it stubbornly refuses to boil over. Somebody or something will pop the bubble eventually but who, or what, and when?