"Through a glass darkly" is how St. Paul described our normal perception of reality. Now, there is hardly any issue the good saint and I agree on, but I have to say that when it comes to banking and finance, this is one point upon which I believe the good saint knew what he was talking about.
It's too bad, actually. We like to consider ourselves educated people, but are we? Do we in fact know how things truly function in our world? Are we really informed? Do we have any real idea how institutions and organizations and people interact to produce this reality in which we find ourselves. I would like to think "yes", but the more I interact with and engage my fellow man, the more I think "no".
In a previous series of diaries (Prometheus Unshamed I – V), I tried to point out that that there is a need these days to reflect upon, and in the end question, things that we simply take for granted. In that case, it was our relationship to technology. Here, it is about our relationship to money, banking, finance and economics. In what follows, I will be referring to this subject by any of these terms. They are not interchangeable, but they are intimately related and it is really not all that necessary to painfully and excruciatingly keep them separate. They are different aspects of the same phenomenon, this is true, but my intent is to help understand the principles involved, because, if we don't understand the principles, we really don't understand the phenomenon at all.
I'm a big fan of principles. As a wise man once noted, "I stand on principle, because it's the only place where I don't get shit on my boots." He knew what he was talking about. Another wise man once told me that if you can't explain yourself to an eight-year-old, you don't know what you're talking about. I think both of them are spot on. Now, I don't think any of you are merely mentally equivalent to eight-year-olds ... after all, you're not Republicans ... but it is nevertheless essential that we get down to essentials. And it is this level of simple, essential principles that I am aiming toward.
Let's face it, we go to school and the first things we learn – and rightfully so – are reading, writing and reckoning (arithmetic); that is, the good old 3 R's. Not everyone who learns them become critics, authors or engineers. We don't need to. It's not about being an expert in any given individual field of study; we go to school to help us understand the world in which we find ourselves, to make sense of what is happening around us, but above all else, we go to school – or should be going to school – to learn how to distinguish the real from the crap. Too few can do this anymore, but that's another matter (and perhaps diary) for another time.
I can't put my finger on the exact moment it happened, but at some point – in the not-too-distant past – we exchanged our society for a mere economy. If we look far enough into the past, we find that there was a time when there were human beings roaming the earth who were social creatures, not only economic ones. I still had the feeling growing up, in what was anything but a perfect society (hell, we hadn't even achieved civil rights and equality yet ... ooops, we still haven't ... but we pretend that we have) but it was still a society. There was something social about everyone I knew, even if the realm of their acceptance only extended to the neighborhood. In most cases, though, it went further: to the church congregation, the community, and even, in some cases the nation. Little of that exists anymore, because in the meantime, money talks, and there is nothing else to say.
Despite this, I have not yet given up all hope. OK, I've given up most of it, but there is still a kernel left, and it is on this basis that I am going to try to put together a most basic primer on banking, finance, and economics. I know many of you are now rolling your eyes – and I don't blame you. How often do we have to go through this. Well, the teacher in me says, "until we understand what we're talking about". There is nothing I am going to say that none of you has not heard before. My hope is that I will say it in such a way that if you haven't grasped the basic principles by now, you will by the end of this series. Bear with me, at least my intentions are honorable.
Here's what I am going to try to do: first, we're going to look at what a bank is and how it function – once again, in simplest terms. I then want to examine how a bank, as a privately owned organization fits into the grander scheme of what we might call a national economy. Yes, I'm approaching this very step-by-step, level-by-level – even hierarchically (against my better nature) – just so we all have a common understanding of how it all fits together. I'm not offering solutions, I think they become fairly obvious once an insight into the "system" has been gained.
And now, for my major disclaimer: I'm sure there are any number of you finance, banking and economics wizards out there who will testify that I'm oversimplifying and reductionally distorting the "truth" of the matter. If I am wrong in principle, let me know. I don't claim to be perfect or to know it all, but I do believe that I generally understand what is principally at stake. Any comments you can make to help clarify – not obfuscate – the matter, are certainly welcome. If you just want to show off your smarts, keep to yourself. The fundamentals, the essentials, the basics are important to me, not the details.