Clever Bull

"Oh, who knows what a bull market and a bear market actually is? It's all trader 'geek speak' to me." said Gavin, as he looked at the statue.

The large bronze charging bull statue stood there shining in the sun, resolute as always outside the New York Stock Exchange.

"Gavin, dude, let me enlighten you. The bull signifies courage and resilience, which is exactly what this city needs right now." said James.

"The bull throughout history has signified tyranny, ferocity, stubbornness and brutality," said a short man with an enormous stomach and large butt. He had narrow shoulders. He waddled closer to them. His piercing stare through his silver-rimmed glasses seemed to exude a focus and confidence that someone of his physicality should not have.

"Yes, good point. You see, James, it's not necessarily a good thing. This stupid bronze bull can be as bad as it is good."

"Young men, if you could indulge me a few minutes, and listen to a story?"

"Yes, I would like to hear a story." Said Gavin eagerly.

"Are you interested in my story, or should I move along to find others?" asked the short man with the silver-rimmed glasses, looking at James.

"Hey, we have a few minutes before we got to get to the station, so go ahead." said James dismissively.

"Well, I will not waste my time gentlemen, good day to you."

"Hey, dude, sorry, I didn't mean to be so …."

"Rude?"

"Well, I wouldn't…"

"Yes rude, he was rude" said Gavin taking a swipe at his friend.

"Thanks Gavin, with friends like you…"

"Gentlemen, if you cannot be grown up about this I will move on, and find others willing to listen and learn."

"Ok sorry, sir please go ahead, no harm in hearing what you have to say." said James.

"Sorry. A word that so many of us struggle to say, and even more of us, when we say it, don't actually mean it." The man said staring at James.

"I am truly sorry. I mean it sir." said James pleading now with the short squat man.

"Well then, gentlemen, welcome to mind expansion 101. They don't teach this to you in school or college or university, so listen up."

His eyes narrowed as he began.

"The story begins with a king and his name was Felix. King Felix. Now King Felix held most of the wealth in the kingdom, as you would expect. One day after a gluttonous lunch, he had gorged himself, and got to thinking. 

King Felix decided that paper notes, with his seal on it would be a representation of value. The king printed a lot of paper notes with his seal on them. He called it 'money'. He would lend this money to his subjects and they would pay him back for the money that he lent them, but he would make money by asking them to pay him back more than the money he lent them."

"Why would he charge them more for the money he lent them?"

"Simple, because he would incur the costs of printing and paper and distribution of that paper money. But he also wanted to be paid for his amazing ideas, so he charged them even more than the costs of paper, printing and distribution and he called that 'interest'. The 'interest' charges would increase over time. The subjects would pay more, the longer that they took to pay him back for the money he had loaned them."

"Well, that hardly seems fair! He is already making more than his costs for lending the money!"

"Yes, correct, but he also knew that without the paper money nobody could survive, so he could do what he liked with those charges. He could increase them a little, as time wore on to make more money for himself. I mean, it was his idea, and ideas do have value. He would do this slowly, little increases twice a year. The increases were small enough so as not to affect anyone's life initially, so people just accepted them."

"Why didn't the subjects point out the extra costs they were incurring?" asked Gavin.

"The king knew his subjects feared breaking his laws. After all, breaking his laws meant jail."

"So, he was controlling people with fear."

"Correct, and his subjects needed the money to buy food and transport and build houses. The king kept a comprehensive book on who owed him, and how much they owed him. Now the curious thing was that when you calculated how much he had lent to all his subjects, it was more than all his houses and palaces and gold and silver."

"So, he was lending more than he had to give out, so he was making money out of thin air?"

"Correct, but nobody knew this because he would give them paper to depict how much money they had. They didn't know how much he had. The paper was not worth anything, but his seal on the paper made it worth something. The subjects ran around trying to secure as much of the paper notes with his seal on it, because it allowed them to buy stuff.

King Felix would give subjects more paper notes if they came and exchanged it for gold, or silver, or houses. The king's valuators would decide on the value of the gold and silver, and give the subjects the value that they (the valuators) had decided in paper notes. The valuators would consider the extra charges on those notes, so all the subjects received less in paper notes than the value of their gold or silver and he would also charge them interest on what they would receive."

"That is so disgusting. What a greedy pig of a king! He gives them less based on valuations that he controls and then charges them for the pleasure of robbing them!" said Gavin, disgusted.

I agree, but it doesn't end there. Felix the king was lending more paper notes than ever and there were more and more people demanding the paper notes to buy stuff. The king kept printing and charging his subjects for the paper notes and, with the increased supply of paper notes, they became a lot more common. Increased supply means their value declines. The king didn't care because he made more, the more he printed, and the more he lent, the more interest he would receive, and he would receive more gold and silver and houses as time wore on. He would receive more gold and silver and houses because as the value of the paper notes declined, the people would need to pay their debts with what they owned."

And that, young men, is how the banking system works. The king is the central banks; they give you money that they don't have, then they charge you interest on what they have lent to you. You pay them from what you earn, and if you don't pay them. They take your property, or cars, or other assets, based on their valuations, and that's where they make their money."

"But how can they lend money without having enough money in the first place?" asked Gavin

"Good question. The reason they can do this, is because the law allows them to do what you and I could never do. I mean if you live in a house that cost you $300 000, and you have paid off $150 000 of it, surely you should be able to lend that $150 000 to others, and charge them interest. It is value that you have created, so why not?"

"Who makes the laws?" asked James.

"The politicians do. You know the guys you elect to represent your interests. They make laws that make our lives tougher. The banks hold sway over them."

"Why would they care what the banks think?" asked Gavin

"For the reason as old as humanity, follow the money. Money, power, love, the three main reasons people commit crimes, but there is one principal that encompasses all the above."

"What's that?"

"Selfish greed," said the short, squat man.

"Sir, what's your name sir, if you don't mind me asking?"

"Mr. Gander."

"Well, Mr. Gander, I have a question for you. Who would supply the money that we would require in order to make the world work? You know what they say, money makes the world go round?"

"Ah, wonderful insight, young man, a bank would supply the money, one national bank, whose only task would be to evaluate and administer the money supply, based on economic projections and growth. They would be on set salaries and no bonuses."

"But then how would people make money, you know, start businesses?" asked Gavin

"They would present a business case to the bank, and the risk assessors would decide whether to lend them the money."

"So similar to what happens now?"

"Yes, but without the big bonuses and targets for growth, inflicted on bankers. A sort of regulated capitalism. If the bank rejects the business case and the business starter believes he has a good potential for success, he can lend from others who decide to lend him money and charge him interest."

"Do you think this would work?"

"Why not? It would slow down inflation, it would be an incentive to people to get rid of their debt, the more they pay off their mortgage, the more they have to lend and the more interest they can earn. The more interest they earn, the more they can pay off their debt and the more they can earn. It sustains itself."

"Aha, but the mess will arise when people don't get the interest payments from those they lend to." said James, with a twinkle in his eye.

"Good point, young man. That is why there will be a law that you cannot borrow more money, than the value of your home or assets, which the bank will regulate. If you do not pay the interest to any lender, then you have to sell your home and pay each lender their portion."

"But how does anyone get started? You know buy a house? They need money to do so?" said Gavin, now challenging the little man.

"That is where the bank comes in, lending a maximum of $300 000. This will keep house prices in check, and building costs down, and anyone who wants to build a better house for greater value can do so from the value that they build up through paying their loans back. Also, all loans would be interest free, the only extra costs would be administration costs for banks to set up and administer the loans. That will keep inflation down and protect the value of the money."

"But what if the people who lend money, want to charge too much interest?"

"Is it not easier to have thousands of potential lenders, than few? The competition would keep lending fees low." said Mr. Gander and he winked at James.

"Thank you Mr. Gander I think you have indeed opened our eyes." said Gavin

"I am Gander, the goose that lays the golden egg. My golden egg is knowledge, not actual gold, but worth far more. Spread the thinking, hopefully your generation will end the tyranny of the 'bull of the banks' if you get my meaning? It's time to get rid of the 'clever bull' that rampages through our lives and subjugates us to a life of slavery."

With that, the funny little man known as 'Gander, the goose that lays the golden egg' disappeared.