Bankers’ bonuses: not seeing the willow for the trees
Now back to our world. Some time in the past, we swapped from an asset backed currency to a debt-based one. Since then, over a number of years, the issuance of this debt based currency was handed over to a small cabal of banks, who earn more revenue the more debt and currency they issue. Unsurprisingly, given that they are very smart people, this is exactly what they did in increasingly innovative ways; the result is that over 90% of the (up until recently) exponentially growing money supply was created in this way.
As predicted by Austrian-school economists we are in the end game of a disaster – and it is interesting to be a witness to the shape that disaster is taking. One of the outcomes is pay for bankers far in excess of their economic usefulness – but I fear this is the least of our worries. Successive governments have created a Ponzi-scheme economy, which will go the way of all Ponzi schemes. Worse still, because of the enormous rent that has been paid to the financial service sector, our economy has arguably become a single-commodity economy with that commodity being money/debt. The resultant FIRE economy (Finance, Insurance and Real Estate) has sucked much of the talent and many of the resources from the real, productive economy, which has been slowly dying for 40 years, so that after the next and last financial crisis there may be nothing left to take the place of financial services (since there are no more government balance sheets to bail them out).
The debate we should be having, especially on the IEA website, is whether the asset-based money system that we need to move to should be privately issued or in the hands of the government (with most of the readers, I assume, being in the former camp, although the latter is a valid position too) and how we could get there with the minimum amount of pain.