Something I don’t understand is why people have always got to pay what the banks lend them. I have a friend in hard times I lend money to. He calls it a loan. I know he is not going to pay it back. He says the loan is just to help him “get back on his feet.” We both understand that unless he wins the Lottery I won’t see that money again.
I understand that banks should pay back loans they lend to one another. Honor is involved. They are the professionals. If you can’t trust one another who can you trust etc. etc. But why should that extend to the rest of us? How many of us, when we took out large mortgages in 2006, were relying on the soothing words of the bankers. We put ourselves in their hands.
The lengths that banks go to to get their loans paid back is amazing to me. You thought that countries were the most powerful entities on the planet. Bankers are currently bringing certain countries to their knees. Huge hardships are demanded of the people who live in these countries. They lose their jobs. They are living hand to mouth.
Most of these countries have big armies, or anyway medium sized armies. The bankers have no weapons. What is wrong with this picture? The only country that stood up to these banks during this recent recession was Iceland. They threw all the bankers out, the debts unpaid. Then they started over.
In the current circumstances, the residents of Greece are suffering terribly. Spain is suffering. Cyprus is suffering. Even America, the strongest country in the world, is buckling under. We are cutting service. We suffered a slight downgrade in the rating of U.S. credit from AAA to AA+ and that was it. There is now less childcare, education, health. And we hope the rating will soon be restored. Celebrations will begin everywhere when it is. What an accomplishment! Thank goodness we cut healthcare, education and childcare. Of course they stay cut.
A few years ago, video game people began developing “money” you could win if you beat the monster and got to the upper levels. The “money” had no value, except to people playing the game. You could buy “things” with this money, for example an “AK47 Machine Gun” that, on your screen, would help you get to the upper level faster.
About five years ago, some Silicon Valley people took it a step further. They started using something they called Bitcoins, and these Bitcoins could be used not only for make believe things, but for real things among the geeks in Silicon Valley. Not only did those living in the cyber world trade them, but various merchants in the valley began accepting them. I’ve seen this phenomenon in certain resort islands I have visited, although not in the Hamptons. The resort issues “scrip.” It has the name of the island on it. And you get a bigger bang for the buck when you use the “scrip” than when you use the dollar. Such phenomena come and go.
But this is different. The creators of Bitcoins are smart. They decided that if Bitcoins were to become a viable alternative on a wider scale than just in the immediate area, they’d have to limit it. They could do that. After all, you can’t counterfeit Bitcoins. They don’t exist.
An easy fix, of course, would be to link Bitcoins to the dollar, but that leads you down the garden path to having Bitcoins just be another currency, like the Shekel or the Pound or the Ruble.
So instead, the Bitcoin people dug deeper. They realized that all modern currencies are linked to one another but also are linked to a physical element: gold. You dug up gold. Currency would be the calling card of gold. And it would be limited to the amount of gold that could be dug up.
What could a currency that did not exist in the physical world be linked to? The Geeks decided to link it to something else that does not exist in the real world, the ability of mathematical geniuses to solve complex formulas. There is a lot we don’t know about the world. There is no dearth of formulas. But solving them is another matter. At the present time, there are mathematicians working away solving formulas. When they solve one, from the sweat of their collective brows, it means they can create more Bitcoins. The total number of Bitcoins allowed is 21 million. When we get to that, that’s it. Currently, there are 11 million. But there are a lot of mathematical formulas waiting to be solved.
Into this situation have now come the Winklevoss Twins. You recall them. They are the big muscular fellows who rowed crew for Harvard, claimed they started up a social media for fellow students there and elsewhere which they later claimed that Mark Zuckerberg stole and enlarged into Facebook. When he became a billionaire, they sued him. Zuckerberg settled, rather than go to war with them. I think the Winklevosses each got about $30 million, a drop in the bucket as far as Zuckerberg was concerned.
About a year ago, some banker types, without the approval of the original Bitcoin people, began linking its value to the dollar and doing “trading” in Bitcoin. Who could stop them? Nobody. For the first year, the value of a Bitcoin hovered around $15. But then it caught fire. Everybody wanted them. This past Spring, the value of a Bitcoin leaped to $250, then settled back. Currently if you want one it will cost you $75. Hmmm.
Now the Winklevoss Twins have announced that they are opening an exchange for Bitcoin. It will be like the current exchanges you read about for copper or hog bellies or gold. But they will run it. It is to be called Index Universe. And what they will do is put up the daily prices of Bitcoin, track them higher and lower, buy and sell, and take a small cut of each transaction. They are looking for approval from bank regulators for this new product. I have no doubt they will get these approvals because it is quite clear that Bitcoin, unregulated, could mean the death of money. Approving it will tractor beam it all into the system, thereby ending the problem.
When the White Men first came to Long Island, they were met by the original Indian tribes who, among other things, offered to trade some of the unique goods the White Men brought—gunpowder, swords, belt buckles, hats—for what they called Wampum.
The Indian tribes got Wampum from the beaches of Montauk where a particular kind of clamshell was to be found. They’d punch a hole in each clamshell, then string them together on leather strips and worn as necklaces. From a certain perspective, you could say either they had the money or they didn’t, and you could see it right there.
The tribe in charge of making the Wampum was the local tribe known as the Montauketts. They’d find the shells, string them, and then either gift them to others, trade them to others, or be robbed of them by others. That way Wampum would circulate through the various tribes on Long Island all the way to the other end of Long Island. It was a primitive system. No trading floor, stock exchange, contracts to be signed—you signed a paper!—the Indians had no idea about that. When the daughter of Wyandanch, chief of the Montauks, made a treaty with the Montauks and the White Men, she signed her name with an “X.” She didn’t even know what X meant. And she surely didn’t know the White Men would now take over the land and kick them off.
There was honor and a person’s word of course. But Wampum was not that important and did not rule the world. There is no story from the Indian world about any tribe that couldn’t give Wampum back and thus was reduced to an impoverished
That only happened after the White Men arrived.