Am I accountable to any individual or organization that is in turn not accountable to me? This apparently obvious question turns out not to be at all obvious. Is it not true that if I borrow money from a bank for a mortgage that I am in fact accountable to it per the terms of the mortgage? In the simplest case, yes, I am. And my home is collateral available to the bank if I fail to make my mortgage payments. Now letís try a slight variation. Suppose I have funds invested through the same bank in amounts equal to or greater than the mortgaged amount, i.e., letís assume the bankís trust department is managing money I inherited. Letís further assume that the bank makes investment decisions like derivatives that consist primarily of sub-prime mortgages that go sour, such that my bank has to fold. Am I then on the hook to pay the mortgage, or, are they on the hook to pay me the difference between the mortgage and the larger amount of my money that they lost? Is my inheritance money FDIC insured? Not necessarily. And even if the first $100,000 is insured what about the rest? Who is accountable to whom?
If you think the above example can be explained away by pointing to contractual statements and required signings about risk and responsibility then read no further. I donít want to waste your time or mine. What I want to promote is the idea of equal accountability for all transactions, for if I renege they get my house. If they renege, what do I get? Where is the collateral? How is it that their "trust" department is assumed to be reliable without collateral but I am not unless I have collateral? I guess I canít be "trusted."
For every $100,000 that I invest at the bank, the bank can borrow up to one million dollars and then loan that money out at interest, or, use it to purchase whatever investment vehicles they believe are risk-worthy and will make a hefty profit for the bank. And if they are wrong? Suppose they offer high interest credit cards to marginal customers. Or suppose they do buy derivatives with a large component of sub-prime mortgages. All of a sudden it becomes clear that any error in their judgment becomes my problem, while any error in my judgment resulting in my inability to make my mortgage payments also becomes my problem.
To cut to the chase, the bank is not accountable to me, but I am accountable to the bank. I have to have collateral that they approve. They do not have to have any collateral that I approve. If I fail I lose my collateral. If they fail I lose my inheritance and I am still on the hook to pay the mortgage to whatever organization acquires their "assets." What do they lose? Nothing.
The bank can leverage deposits at a rate of ten to one. Can I without collateral? Of course not! Is the bank trustworthier than I am? The current meltdown of the financial markets indicates otherwise. I believe the words criminal negligence apply to the current disasters with blame shared equally by financial institutions and the federal and state governments. The governments were and are responsible to assure meltdown conditions canít happen in the first place, via regulation and watchdog activities. The financial institutions are responsible because they are populated by educated people who know what they are risking before the fact and who have chosen to be as irresponsible as an addicted gambler Ö with my money and with "funny money" created by the Federal Reserve.
It is of course the "funny money" that is the root cause of inflation, and that inflation eats away at my savings and diminishes my current earnings, while my income tax bracket periodically increases when I get raises to cover some of the effect of inflation. And when I cash in my savings, my interest is taxed with no regard to the cumulative effect of inflation. It thus is obvious that I am accountable to the federal government and they are not accountable to me. They diminish my wealth routinely by creating money out of thin air. This, I am given to understand, is what keeps our economy rolling, i.e. ever increasing numbers of dollars run through the credit process. An easy supply of money leads to easy borrowing, and our experience in recent years indicates that the process leads both to inflation and very high levels of indebtedness for the citizens who borrow the money and have difficulty paying it back.
If there is a job market that supports the paying back of borrowed money then the system appears to work. In actuality what happens is essentially robbery where people on fixed incomes or low interest high security savings accounts or even conservative mutual funds find themselves getting poorer all the time. If there isnít a good job market then we ultimately experience a financial system meltdown as too many citizens find themselves unable to pay for the debt they have acquired. This latter issue is an expected result when good paying jobs are not protected and absurd sub-prime mortgages and easy credit via high interest credit cards are allowed to exist.
Both government and banks are not only not accountable to the citizens but they are not punished for the damage they do. Likewise the corporations that offshore the better jobs or import cheap labor. The real point is that all of the financial, governmental and corporate leaders had to understand that they were creating an impossible situation. You canít inflate prices and give easy credit and then undermine income and expect any good result. A child can see the absurdity of that process.
The whole concept of a free market economy based on capitalism is thus seen to be completely inadequate to protect against greed and corruption. What was at one time a national risk is now a global risk Ö and a realized certainty as of this moment. Further consider that in a global economy no individual nation has the power to control corporations or financial institutions that deal globally. This is a built in flaw of major significance. Self-interest at corporate, institutional and governmental levels guarantees that the process will implode. It is simply a matter of how much time has to pass before greed and corruption create disaster. Well, now the disaster is a reality. We have yet to experience the pain that will come in the next few years.
Unrestrained capitalism has proven to be every bit as stupid as communism. Neither approach is respectable. And neither approach works because of "human nature," which is to say that unscrupulous people seek and achieve great power and do great damage. What all the economic and political systems have failed to address is limitation of power and wealth, and specifically the aggregation of both. I wrote about this issue in my book "Destiny" with stern warnings about the necessity to control, stop, and reverse excess wealth accumulation and aggregation. But I am a little guy. No one is accountable to me. The hogs who have ascended to power in corporations, financial institutions and government see only their own wants and not the needs of the citizens or any responsibility to those citizens.
So how is the essentially powerless citizen supposed to respond to these realities? Few people will have the resolve to do what is necessary, which is to refuse to borrow any amounts of money, either for mortgages or vehicles and especially not for credit cards. I quote from a line in the movie "War Games" Ö "The only way to win is not to play." There is another old saying that also applies, and it is: "You cannot cheat an honest man."
What am I really saying? Am I telling you to consider our economic system to be as bad as a casino? Yes, I am. Playing on human weakness is the primary reason why our unstable and cruel economic system has appeared to succeed. For example, if you donít get on board and buy that house you will miss the opportunity to experience an equity increase due to inflation Ö which will also make your mortgage payment effectively smaller as you receive pay increases to counter inflation. Think about it Ö we help create the very problem that is now consuming us by playing the game. And Iíll "bet" that almost none of us see a home purchase as a way of stealing money from older fixed income people or those with "high security" savings accounts that earn very low interest.
All in all our economic system is a big milking machine, and if we refused to let our fears and appetites drive our behaviors it would stop. But do we have the character necessary to take a responsible position as individuals? Do we have the foresight to force the election of people who would severely control the abuses that have led to our demise? This is a true dilemma, for we operate in the real world as self-directed and selfish individuals and groups. And this weakness infected the great possibilities of both capitalistic and communistic systems.
It seems that the too often mentioned "paradigm shift" is required to combat human nature. There are some people who will preach that religion is the answer. I wonder how many of those people would be religious if they came to realize that their absurd belief in an afterlife is just as bad as our self-deluding economic selfishness is here? Those folks are also playing in a casino. So, what to do?
If you are familiar with my earlier writings you already know my answer. The paradigm shift is the realization that all humans must be improved overall in their intelligence via genetic engineering, so as to create a level playing field. We have always lived in the "Dark Ages" and only occasionally seen glimmers of light via the products of applied science. We do have the means to pull ourselves up by our bootstraps, albeit slowly, to create a world entirely better and different from the one we have now and have had in the past. If only we can avoid destroying this world in the interim!
In the meantime, prior to the realization of intelligence improvements via genetic engineering, we must put in place curbs to accumulation of excessive wealth and power for individuals, corporations, churches, financial institutions and governments. We will not do that unless we believe in the future realization of a super intelligent humanity that will simply be too bright to allow excesses or to fall into financial traps. "Stupid," which means unable to learn from experience, is the one constant throughout history that must be changed by the few who are fortunate enough to be our most intelligent.
I wish us good luck and, uh, "Godspeed." And do read between the lines.
Better yet, read or reread "Destiny."