The term “Bankster” has become trendy during the recent global crisis due to the various financial problems governments and economies were facing.
Hedge funds, derivatives and all kind of paper products were created and traded through the capital markets and were the top theme for any sophisticated investor.
The banks are always recruiting the best minds in math and physics from the top schools in the UK to train them and create financial products (derivatives).
The profits that the puppets were accumulating were out of proportion to what a normal business person or executive could earn in a normal business, especially as they were just coming out of the university.
The simplified procedure was based on the real economy. They were creating products 3 or 4 levels over the real assets and these were bought and traded by hedge and pension funds.
Since trading was done in big amounts, and on a daily basis, the profits were excellent, but the result when viewed from the perspective of the economy, was that strong minds were deprived from producing real services and products.
Instead, profit was created through paper trading. This generated claims to real wealth without creating one tomato.
This enhanced inflation and created bubbles. Of course, no banker, financial consultant, or investor wanted to use their logic at the time as they were all plunging into the flood of increased profits without thinking of the immediate future.
It took some years until the surprised sector began to see what it knew all-to-well to be wrong as it was going bankrupt. Everyone was looking for a scapegoat, and most of the solutions were, again, based on 2+2=5 logic.
Regulatory bodies and institutions will argue that banks are regulated and have been separated with what we used to call a ‘Chinese Wall’ between the trade of bonds and stocks and the advising or lending of corporations so as to secure and police any kind of action that could create distortion.
This is far from the truth. From the moment banks are today permitted to be listed, they are at free to invest their own money to paper assets and their status is based on their profitability through capital markets and the game is lost.
This then leads to questions like: What is a bank? What is the role of a bank in a community? What is credit? How can credit create wealth?
Credit, as a word, is a derivative of the Latin verb credo, meaning “I trust”. Thus, “trust” is the essence of credit and banking.
Bankers were historically distinguished and prominent citizens of a community that could give credit to businessmen involved in the production of an item or good, and thus could assist them in creating wealth.
Big or small, technicians or industrialists, merchants or traders of goods, the people in production were the ones that could create real wealth consisting in products and services. Bankers made their money from percentages of the business profits.
From the moment the banks became corporations and started to compete with the entities in the field of production, they diluted their status and lost their real role as supporters of production.
The solution to tackle these hurdles people need insight, knowledge, decisiveness and, above all, courage to first understand the problem and then resolve it gradually so that the consequences are manageable.
There is need for every tool that has been created to return to its real function. Capital markets should focus solely on manufacturing. That was the reason why they were created.
Banks should be de-listed and work as real supporters of production in agriculture, industry, and commerce, like what the Russian crypto-currencies are covering now.
As for paper contracts, they should also be limited to real hedging for the manufacturing industry. In any case, this was the reason of their creation. And you never know…someone, somewhere might listen to the voice of reason and start this revolution.
New Europe / ABC Flash Point Banking News 2020.