In the old days, Egypt, China, the empires used to have, Oh I don’t know, ten years of grain stored. Now there isn’t much need for physical storage like that. But now we don’t have, by and large, shocks of physical goods, but now financial shocks. Book keeping really.
Why?
How can we have very very liquid markets in ‘securities’( paper ) and have it effect the physical reality, the people, goods, service, manufacturing so much?
How with all these lawyers, government intervention have we become so much more frail in paperwork, symbols, digits on a hard drive somewhere. Meanwhile all the factories are just fine, workers work, consumers buy.
Very strange.
I am in the same situation - and I guess most bankers are, too.
I guess it’s not only about bookkeeping - it’s about the promised rights to consume raw materials, services, products and the use of land and hands in the future.
So it’s about trust. Will the debitor be able to fullfill it’s promise to the creditors ?
The promise beeing for example to deliver not only 10$ but the right to consume a tripple whopper at burger king - to name an internationaly fixed value - and with that the right to parts of a cow, hands and places and services involved etc.
For many debitors today the answer would be - no. So the creditors don’t ‘invest’ anymore but in direct values like land or basically needed businesses (warren buffets train deal).
There’s no possibility at all to run a system based on returning 20% interests - because after a brief time the debitors had to promise the earth and the moon.
So the promise has to be diluted by inflation (owe you 10$ + interest but I will increase the ammount of money in a way you won’t get more then a diet coke) - taxes have to be payed on revenues from capital lending - interests had to be paid on money.
The later failed as an instrument to regulate the balance between debt and credit if I see it correctly. And that had to do with political influence on Mr. Greenspan.