The modern financial system is the biggest Ponzi scheme

Clementine 2022-01-16 08:01:15

At present, all legal currencies in the world are part of the reserve system. How the partial reserve system works can be explained with a simple example: the

law stipulates that the deposit reserve ratio is 20%.
Xiao Ming deposits 100 yuan into Bank A, and Bank A only needs to keep 20%, which is 20 yuan, and the loanable amount is 80. Yuan.
Bank A lends 80 yuan to bank B. Bank B only needs to keep 20% of 80 yuan, which is 16 yuan, and the remaining 64 yuan is loaned to bank C. In
this way, under the 20% reserve ratio, 100 yuan of actual assets can correspond to 500 yuan at most Yuan debt. One day, Xiaoming had something to do with his family, and he went to Bank A to ask for 100 yuan back. But there is only 20 yuan on bank A's account, which can only be breached.

Someone wants to ask: No, in real life you can withdraw money immediately if you go to the bank to withdraw money as long as it is not a large amount.

That's right. But that's because the vast majority of cash assets in society are in bank accounts on weekdays, which are called precipitation funds. Following the above example, five people, Xiao Ming, Xiao Zhao, Xiao Qian, Xiao Sun, and Xiao Li, each deposited 100 yuan in Bank A. Bank A lent 400 yuan of it and kept 100 yuan. When Xiao Ming withdraws 100 yuan, Bank A will have enough money to pay it back.

What if Xiao Ming, Xiao Zhao, Xiao Qian, Xiao Sun, and Xiao Li come to withdraw money at the same time?

Obviously, Bank A will inevitably default.

In fact, under the partial reserve system, as long as you go to the bank to withdraw all the funds, the bank will inevitably misappropriate other people's money to repay your money. Just like the plot in this movie, it is a typical piece of the East Wall to make up for the West Wall.

Isn't "Take down the east wall to make up the west wall" is not used to describe the Ponzi scheme?

The partial reserve system is a Ponzi scheme in which the vast majority of participants will not ask for full realization.

Some people will doubt that the probability of everyone withdrawing cash at the same time is so small that it is negligible, and it is purely unfounded.

Indeed, just like the Ponzi scheme in the movie, as long as most participants do not ask for all the cash, the scheme will not go bankrupt. However, the probability of a scam bankruptcy may be far higher than everyone thinks. There is a special term to describe this phenomenon, called bank run. There is an entry on the Wiki called List of bank runs. If you think it doesn't matter to you, you might as well read this article.

However, the problem of partial reserves goes far beyond the Ponzi scheme.

First, the partial reserve system violates the basic principle of the natural law of property rights: one thing has no two masters. Simply put, a thing cannot be both yours and mine at the same time.

Continue to talk about examples.

Bank A lent 100 yuan to bank B without Xiao Ming’s consent, and bank B obtained the right to use the 100 yuan. At the same time, Xiao Ming also believes that he has the right to use the 100 yuan. After all, in Xiao Ming's opinion, the money is of course his own money, it is only in the bank, and there should be no restrictions on withdrawal and transfer. As a result, a strange situation emerged: Xiao Ming and Bank B had the right to use the 100 yuan at the same time.

Key interpretation: Xiao Ming believes that Bank A is only escrow, but legally speaking, it is a loan.

Under the partial reserve system, by obscuring the lending relationship and escrow relationship, lending rights can be transmitted in a chain manner, resulting in multiple parties having the right to use the same fund at the same time.

The right to use is an important part of ownership. So, does the ownership of this 100 yuan still belong to Xiao Ming?

It is and it is not. It's just a mess.

What problems will be caused by unclear property rights will not be discussed.

Second, under the partial reserve system, debt expansion is inevitable, and finally the entire economy is built on the basis of debt expansion. The economic cycle and the debt cycle are highly overlapped, and the debt cycle will greatly aggravate the volatility of the business cycle.

Looking ahead, this is the history and reality of the global economy.

On the pretext of smoothing out the huge fluctuations in the economic cycle, the government and the central bank have gained huge economic control.

However, just like in the movie, once there is a run, everyone will be finished.

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Extended Reading
  • Trevor 2022-03-17 09:01:07

    Is a person's scam a person's exhaustion? Why do people betray their relatives and be left alone and helpless? ...You bear all the sins, you cannot bear the extension of sins. The beginning of greed is the end of the abyss. Good subject matter, no good technique; two hours of watching movies is more boring than reading a book.

  • Arden 2022-03-15 09:01:06

    Wife ion is scattered. The mob (lack of government supervision, media creation of gods, human greed).

The Wizard of Lies quotes

  • [last lines]

    Bernie Madoff: Let me ask you a question. Do you think I'm a sociopath?

  • Bernie Madoff: Well, but these people, you know... they had a little greed in them too.