Freitag, 29. Januar 2016

Rethinking what an Investment really is...

If you follow the definitions of the so-called economic sciences , then you end up in a maze of smoke and mirrors and the matter never gains clarity. This result is almost certainly by design! To achieve clarity, one must apply critical thinking skills to the observable things, leading towards an explanation / theory. Successful investing is a successful process of aquisition of work results, which is an exploitation of the counter-party. The investor wants a return greater than what he "invested". To achieve this goal the investor (an entrepreneur or the State for example) goes to the bank and takes out a loan. The Bank creates money = a refined to Umlaufaehigkeit claim = a generally accepted "money" claim = an "ex-nihilo" (out of nothing) claim against the public and places such "funds" at the disposal of the "investor". At the same time, the bank creates a specific agreement with the borrower for repayment of the "money" / the debt = the credit contract. With the money made available to him the investor buys labor from workers in return for wages. The investor is free to determine the use of the labor (eg the construction of a road ). When the road is finished, the investor owns the rights to the road. In order to fulfill his debt contract with the bank, the investor demands a fee for the use of the road from the workers and those who have fed the workers in exchange for money ( the farmers ) during the construction. The farmers accepted the money because they had to acquire some to pay their taxes to the state. They also saw advantages to having access to a road. So the money is recollected ("reflux"), flowing back to the bank in the form of debt repayments. This results in the bank-credit "money" being destroyed. If things were to remain that way, the economy would collapse, as it would be starved of "money" while the demand for money necessary for paying taxes and fees to use the work results continues. To ensure that this does not happen, the bank must find other "investors" with credit-worthy projects toprovide the workers work (and wages) and acquire the work results as described above, to satisfy their central motif "More, more... MOAR" and their credit contracts with the bank. But the scam works also without funding productive work projects -- undertakings that are totally unproductive. For example in an economy where all necessary roads are already built, if the money created out of nothing is more and more allocated towards speculation in the financial "markets" = unproductive redistributions in zero-sum games which contribute nothing to the "real" economy. The system is expansive by its nature, but at the same time it creates highly concentrated ownership of the things (especially the means of production) in the hands of those who were deemed by the Bank as credit-worthy and successfully "invested" the loan in the way described above. If the money creation / lending process stops and thus the investment = aquisition / exploitation process for whatever reason (eg, binding of money creation to gold, investors run out of ideas, a crisis that reveals the operation and its consequences), the economy grinds to a standstill resulting in an inevitable deflationary collapse.



Sapere Aude!

Georg Trappe

This article was first published in German 29. July 2015 here
Many thanks to Wesley Freeburg for editing and improving readability in Engish.
 

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