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Thursday, August 13, 2015

Wasting Money on Money

Some estimates put the daily trading volume of currencies at $5.3 trillion. This means that every day, the people who are buying and selling money (preferably for a profit) are transacting 25 times the amount that is traded globally for goods and services.  Let's look at that in graphic form.
What is wrong with this picture? Well, I'll tell you: every dollar that isn't invested in goods and services takes away from social progress, jobs, and technological advancements that could save our planet.

What could we do if all that money was working for "we the people" instead of bankers enriching bankers?  For starters, how about solving our energy problem? If we used a couple day's worth of that volume on fusion reactors, we could chip away at the energy problem that is consuming our planet faster than anything else. We could build desalinization plants that utilize that fusion power to pump fresh water into California, which is a desert that happens to also be the bread basket for much of the United States.

The thing is, the technology for all of these things exists. The problem is funding. While trillions of dollars are tied up in markets that do nothing but enrich the traders that are participating in them, companies and research entities that are attempting to improve the human condition are starving for capital.

Let me be clear about something. This is not a condemnation of all bankers. Most smaller banks make an honest living by making loans to real businesses. Every day, they take calculated risks on real people who are providing real goods and services in the marketplace. Without them, capital would not flow and new businesses could not flourish.

If we simply eliminated derivatives and currency trading and forced investors to take the same risks on real companies providing real goods and services, the amount of money that would flow into the marketplace is hard to fathom (well, look at the graph above to get some idea).

Maybe it's time to stop the madness. We cannot expect the power brokers in government to do this.  They are part of the system that created this mess. It would be like asking the fox guarding the hen house to please stop eating chickens. Good luck with that! No, "we, the people" are going to need to rise up and demand this.

I can hear the currency traders now. They will tell us that without them, currencies would become unstable and economies would collapse. They are right. As long as we have a global currency system based on nothing, this juggling act must continue. However, if we were to go back to the gold standard or some sort of cryptocurrency like bitcoin that cannot be manipulated by monetary policy, currency would become a stable variable in the economy.  This would force actors to manipulate other aspects of the system. This would be a good thing. To learn why, you'll need to do your own research or wait for another post. Special thanks to George Gilder for sparking some of the ideas herein.

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