Humanity's Evolution An Interactive Book, Webseries, and Movie

Our current economic system may have a lot of mumbo-jumbo formulas that keep us from understanding how it works, but at the foundation is the simple and inherently greedy rule the defines how we create money itself.  All of the other rules and formulas are based off of this single rule.  Of course it wasn’t always like this.  The process in which we create money now, called “fiat” money, or fake money, has only been around for less than a century.  Before that our money was based on the gold standard, but had to be de-coupled dew to the needed ‘growth’ of the economy.  So although the old system still used the same basic rule of creating money, there was a built in sub-system to stem its growth.  Now with the de-coupling, the equated wealth generated by the 100’s of people, and 10’s of corporations at the top of the pyramid is now un-checked and continues to grow rampantly even during the current global recession.  How is this possible?  It is simply built into the rules of the economic system itself.

We currently create money out of nothing, or in other words through debt, technically called “fractional reserve banking”.  That by itself is problematic, but when we couple that with the Rules of interest, we simply create a non-sustainable economic model with mandatory bankruptcy as an essential component to the Rules and Procedures of the model.  This is how it currently works for the US system.  Lets say the Fed creates $1,000,000 through a loan of $1,000,000 to Bank “A” with 0% interest.  Bank “A” can then loan out 1/9^th of the original loan to Bank “B”, $900,000 but at 1% interest, or a cost of $9,000.  Bank “B” can then loan out 1/9^th of their loan to Bank “C” $810,000 with 2% interest, or $16,200.  Lets say Bank “C” then goes ahead and loans it to individuals.  Mr. “A” buys a house with a $400,000 loan at a total 30 mortgage rate of just 20%, even though its only 5% per year, that’s $80,000.  Mr. “B” is given a $100,000 loan to buy a boat at 10% interest, or $10,000.   And lets say the final $290,000 is loaned to Mr. “C-Z” through credit cards at 15% interest, which comes to $46,500.  The total amount of money created from the original $1,000,000 is $3,500,000, the total amount of debt created is $3,500,000, and the interest created is $161,700.

The key thing to understand, is that as you go down the ladder, the interest rates get higher, and the money available goes lower.  Additionally in real life, the amount of interest gained on your initial loan is actually only limited by the amount of recruits the bank can get to barrow at higher and higher interest rates, over longer and longer periods of time.  Therefore this example presents a very minimal amount of interest that could be gained because people rarely pay back their loans in one year.  So what we need to demonstrate is simple…  What happens if everyone decides to pay back their loan to get out of dept?  The $3,500,000 of dept is paid off with the $3,500,000 of money created, but there is still $161,700 of dept from the interest on that debt.  Therefore you always have more interest and dept than the principle money created, and you can never ever pay all of it back, ever!  Those at the bottom of the latter who end up with more dept are mandatory required to go bankrupt within the Rules of the system because there simply isn’t and will never be enough money for everyone to pay off all their dept.

In essence, its like playing musical chairs, or hot potato.  Economic Growth is like the ‘music’ playing as more and more money is ‘created’, but then when the music stops, if you didn’t save enough money, then there is no chair for you and you go bankrupt.  Or if you are left with the dept potato when the music stops, your bankrupt.  Yet there is a big difference in these child hood games compared to how our economic system works, and that is that chairs are only taken away near the bottom of the latter, and potatoes are almost exclusively tossed between people at the bottom.  In other words the entire foundation of our current economic system is a game based on fake money created out of nothing.  Hey wait, this sounds familiar… herm where have I herd about this.  Oh ya, a Pyramid Scheme.

The definition of a Pyramid Scheme is as follows:

A pyramid scheme is a non-sustainable business model that involves promising participants payment, primarily for enrolling other people into the scheme or training them to take part, rather than supplying any real investment or sale of products or services to the public. A successful pyramid scheme combines a fake yet seemingly credible “business model” with a simple-to-understand yet sophisticated-sounding money-making formula which is used for profit. The essential idea is that a “Mr. X”, makes only one “buy in”. To start earning, Mr. X has to recruit others like him who will also make one “buy in”. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the “business model” expands.

Pyramid Scheme Definition Continues:

Such “businesses models” seldom involve sales of real products or services to which a monetary value might be easily attached. The flaw is that there is no end benefit. The money simply travels up the chain. Only the originator “Mr. X” and a very few at the top levels of the pyramid make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Individuals at the bottom of the pyramid (those who subscribed to the plan, but were not able to recruit any followers themselves) end up with a deficit.

There it is, that is the definition.  So now that you have read the definition of a Pyramid Scheme, we are going to re-write the entire thing, but this time using the creation of Money + Interest instead of the Pyramid itself.

The definition of the creation of Money + Interest is as follows:

Money + Interest is a non-sustainable economic model that involves promising participants payment, primarily for enrolling other people into the scheme or training them to take part, rather than supplying any real investment or sale of products or services to the public. A successful creation of Money + Interest combines a fake yet seemingly credible “economic model” with a simple-to-understand yet sophisticated-sounding money-making formula which is used for profit. The essential idea is that “Bank X”, makes only one “buy in”. To start earning, “Bank X” has to recruit other Banks who will also make one “buy in”. Bank X gets paid out of Interest Receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Bank. X gets a cut. He is thus promised exponential benefits as the “business model” expands.

Creation of Money + Interest Definition Continues:

Such an “economic model” seldom involve sales of real products or services to which a monetary value might be easily attached. The flaw is that there is no end benefit. The money simply travels up the chain. Only the originator “Bank X” and a very few at the top levels of the pyramid make significant amounts of money. The amounts dwindle steeply down the pyramid slopes. Individuals at the bottom of the pyramid (those who subscribed to the plan, but were not able to recruit any followers themselves) end up in debt and or bankrupt.

In other words you can almost exactly switch out Pyramid Scheme and the Creation of Money + Interest and it is the exact same definition.  The only difference is that a Pyramid Scheme is technically illegal, and the Creation of Money + Interest is allowed by politically created laws.

So how does this pan out over time, it is the basis of our Economic Cycles.  You will learn much more about Economic Cycles later, but all that needs to be said now, is that in the current system, it is mathematically impossible to ever have continuous economic growth which seems to always be the goal, because as soon as a few people are left with unsustainable debt and have to file bankruptcy, if you have saturated the market with money/dept, then there is an automatic snowball effect which is simply stated as an Economic Collapse.  In game terminology, the music stops, the people left with the potatoes go bankrupt, people freak out and pay back all their loans so they aren’t left with the potato too, and the amount of money in circulation tanks.  When it hits the low point it all starts over again with no balance or sustainable growth possible.  Even if we wanted to try to create stability, that would be impossible too, because the pyramid Scheme requires continuous growth to fuel the system, so therefore you can only be contracting or growing, there is no in-between, which is an other tell tail sign of a Pyramid Scheme.  Not to mention that those at the top of the pyramid come out ahead regardless weather there is economic growth or a collapse.

Although this may sound bad, overall it actually isn’t.  It happens to be the best and only system that we have today, and the problem isn’t necessarily the Game itself, but how we approach the game.

The Pyramid Schemes and Creating Money + Interest are systems that are simply games created with fancy rules and procedures that have no realistic baring within natural systems.  Yes, believe it or not, our entire economic system is nothing more than an Adult Money Game.  There is nothing technically wrong with the game itself, and there is also nothing wrong with almost everybody on the planet wanting to play this particular game, but there are two things that are very wrong in how we approach the game.

1)    It is fundamentally wrong for people to die just because they aren’t good at playing a game that was rigged against them to begin with.  People die everyday of starvation, not because there isn’t enough food, or because it is impossible to distribute that food, but simply because they were at the loosing side of a game that was fake to begin with.  Additionally when your game is based on growth and consumption, it is counter-destructive to the game itself to have people die.

2)    It is not only wrong, but stupid to have the foundation of your entire economy of a society to be based on a fake game that unknowingly wastes natural resources and erodes the very basis of life on the planet.  People play games all the time, and they win and loose, but when a game decides the fate of the entire future of a civilization, it just doesn’t make logical sense, especially when that fate involves a devastating collapse.

We will cover these major problems to the way we approach our economy in more detail.  And before we get into the actual new proposed Human Economy, lets first explain and clarify our definitions of Games.

Sources

[http://en.wikipedia.org/wiki/Pyramid_scheme]

[http://en.wikipedia.org/wiki/Money_creation]

[http://en.wikipedia.org/wiki/Economic_cycle]

[Zeitgeist Orientation Guide 2011, Page 23-24]

You can vote on your agreement with this topic by clicking here: Click here to vote on each and every topic/proposal presented in Humanity’s Evolution.