Securitizing people

October 31, 2015 § 1 Comment

Mike T in the comments to the post below:

To make it even easier on “salt of the earth” types, it comes down to this:

When banks behave morally, they securitize property; when they engage in the sin of usury, they securitize people.

Banking castles built with black magic

October 31, 2015 § 21 Comments

Lots of folks will tell you that fractional reserve banking ‘creates money’.  When I was getting my MBA this was taught as if it were some sort of anti-realist magic, the conjuring of wealth out of nothing, the creation of money through a trick of math. But the reason it looked like anti-realist magic was because of the presumption of usury.

In the absence of usurious contracts, fractional reserve banking doesn’t ‘create money’: it securitizes property.  To securitize property is just to issue title to some sort of claim against that property.  That is where every kind of currency gets any real value that it actually has: currencies entitle the bearer or owner to something other than the currency itself, and the value of that entitlement is the intrinsic value of the currency.  When a non-usurious fractional reserve loan is made, the bank issues a new demand deposit account – a claim against its balance sheet – in exchange for a collateral interest in the (new, at least to the bank) property which collateralizes the loan. It would be similar if the bank had issued new stock in exchange for its claim against the new-to-the-bank property. The main difference is that a deposit account is a different kind of security from capital stock, with a different structure of claims against the bank’s balance sheet.

A demand deposit account entitles the owner to fiat currency on demand from the bank, up to the amount of the deposit account — backed by the bank’s balance sheet, or all of the property in which the bank has a stake.  If you want to buy something you can go to the bank teller, exercise your title to some cash, and buy something with the cash that the teller gives you.  Or you can go to the merchant and electronically transfer title to a portion of your deposits to the merchant in return for the merchandise.  Most merchants these days will accept a portion of your claims against a reputable bank’s balance sheet in lieu of paper cash.

This all works fine, and does not create any wealth out of nothing, but it is of course still possible for the bank to fail [1].  If the bank does not stay liquid enough – keep enough cash and credit on hand to meet demand for fiat currency, or, said differently, maintain a balance sheet which is strong enough and of the right composition – then it won’t be able to issue all of the cash that depositors want. Prudent bankers don’t over expose their balance sheets to risk, but there is always risk involved in owning property and it always costs something simply to maintain property against the forces of entropy.

If you don’t want to take that particular risk you can instead pay the bank to keep your money in a safe deposit box, where it literally still belongs to you and is not at risk in the bank’s business operations.  But if you want the bank to look after your property without paying a fee, perhaps even earning interest, you become an investor in the bank.  A deposit account is a securitized investment just as much as capital stock, bonds, or all sorts of other more complex contracts.  And there are always inherent risks to being an investor.

When you introduce usury, though, is when the black magic appears. If the loan issued by the bank is usurious then the bank is issuing a new security against its balance sheet in return for a wink and a promise by the borrower. The bank then enters the wink-and-promise of the borrower onto its balance sheet as if it were actual property.  So in the case of banks which issue usurious loans, many of the loan ‘bricks’ in their balance sheet castles are imaginary; and in the case of collateralized full-recourse loans the ‘bricks’ are made of weaker material than they appear.


[1] I am ignoring the whole regulatory environment and things like FDIC insurance, since my goal here is to help with conceptual understanding not to talk about every detail.  Part of the regulatory requirement is that the bank has to keep a certain amount – a certain fraction – of unproductive cash or federal reserve deposits in ‘reserve’ to meet depositor demands; thus the term ‘fractional reserve banking’.

Where to find me until the orcs come

October 30, 2015 § 30 Comments

Folks are always asking me what we should do from a practical standpoint, given the pervasive triumph of the satanic lies of progressive leftism even within Catholicism. Mostly I think we are just in the hands of Providence. Prayer and fasting and the sacraments are the best things, and living our own lives in the best way we can. Feed the hungry, admonish the sinner, and engage in the other works of mercy. Mostly that is really all anyone can do, all Christians have ever been able to do in the Vale of Tears.

But every now and then, you might feel like picking up a shovel and scooping another little bit of dirt away from the foundations of Barad-dûr.

If you buy the premise that the current progressive freak show is a product of metaphysical anti-realism, and that popular metaphysical anti-realism is a result of pervasively practiced anti-realism in modern economic life, then where to plant your shovel starts to reveal itself. Direct confrontation with progressivism over sex and marriage isn’t likely to get anywhere, because sex and marriage sit at the top of the anti-realist edifice, right next to the Great Eye with all of its current attentions and ministrations. In order to be there at all you have to stand atop a vast tower of unreality.

It seems to me that it makes more sense to take a shovel to the foundation, not the ramparts. The bottom of the anti-realist Tower of Mordor sits in darkness, a haze where little can be seen. For the most part, most people don’t even know what usury means anymore. Most people think that authority is the problem. But every new person who learns, who understands, who accepts is a tiny shovelful of dirt carried away from the foundations sitting in the rock miles beneath the Great Eye.  We might be able to spade away there for quite some time without attracting too much notice.

If you do decide to dig there, make sure you don’t get distracted by the anti-realist rats scurrying around the foundations, infectious modernist ideas whispering lunatic missives against fiat currency and fractional reserve banking, murmuring about the virtues of hoards of gold and how greed is good. They too, witting or unwitting, are just servants of Mordor, creatures embracing unreality as if it were Being, darkness as if it were light. The fact that they don’t sit next to the Great Eye in the Circle of Sodom doesn’t make them servants of the light. They are there to chew out your eyes while you sleep, so that reality becomes obscure as you wander about blind and desolate in the darkness on the barren plains of Mordor.

Maybe there is a Frodo out there somewhere, carrying a great and terrible Ring toward the Mountain of Fire as I write this.  I don’t know. We don’t even get the comfort of knowing that there is a frail Ring-Bearer out there with his lone companion; just the comfort that in the end, the light has already triumphed and this darkness too shall pass.

But in the meantime you’ll sometimes find me down here in the murk, digging one little shovelful at a time in the rocky and treacherous ground.  I have no great hope of toppling this vast Dark Tower with my little shovel, or even with an army of thousands of shovels.

But I’ll still dig. It is worth digging simply for the sake of defying the Evil One in the name of what is good, true, and beautiful.

There is some good in this world; and it is worth fighting for.

If we are going to name a new heresy, we should get the etymology right

October 30, 2015 § 10 Comments

At One Peter Five, Michael Lofton writes:

It would seem that a new heresy is being created before our very eyes. What is this new heresy? If Arianism was named after the priest and theologian Arius, who championed the denial of Christ’s divinity, it seems fitting to call our present corruption of Catholic belief, “Kasperism” – inasmuch as it has been promoted most vigorously by the German Cardinal Walter Kasper. What is Kasperism? It is the view that dogma is to be left intact in theory, but may be contradicted in practice.

This is giving Cardinal Kasper far too much credit.  If we want to give credit where credit is due, we’d be better off calling the position that dogma is to be left intact in theory, but may be contradicted in practice Castiglionism or Capellarism.

Where the modern sexual freak show comes from

October 29, 2015 § 103 Comments

It is actually rather difficult to get regular, salt of the earth human beings to stop believing in objective reality.  But nevertheless, when you look around at the modern sexual freak show, you can see that it is a result of lots of ordinary human beings denying the existence of an objective sexual reality which transcends subjective human perceptions and preferences.  I could give examples, I suppose, but things are so perversely surreal there is simply no need.

Getting regular salt of the earth people to stop believing in reality takes generations of inculturation.  It requires introducing anti-realism into their everyday lives in a basic way which involves their constant participation: through a pervasive process in which opting out is simply not reasonable or even possible for most people.

This could never have come about through sex on its own, because sex is too private a thing.  But most men simply cannot isolate themselves from the world economically.  There has to be food on the table and a roof overhead.

Which is why when the Diabolical decided to introduce and cultivate anti-realism broadly throughout human society, he did not choose sex as his entry point. The destruction of sex and marriage was a strategic achievement: a prize, not the race itself — a prize which could not have been achieved without centuries of preceding indoctrination in economic anti-realism, with usury at its center. Combined with a moderate liberalism riddled with plenty of unprincipled ‘common sense’ exceptions as the public creed, centuries of anti-realist indoctrination of everyman in his immersion in economic life set the stage for the present freak show.

Where the value of money comes from

October 29, 2015 § 29 Comments

[18] But Jesus knowing their wickedness, said: Why do you tempt me, ye hypocrites? [19] Shew me the coin of the tribute. And they offered him a penny.[20] And Jesus saith to them: Whose image and inscription is this?

[21] They say to him: Caesar’ s. Then he saith to them: Render therefore to Caesar the things that are Caesar’ s; and to God, the things that are God’ s.

Matthew 22:18-21

All paper or electronic currencies (other than bitcoin and the like) have intrinsic value, because they are all options which entitle the bearer/owner to something else – something other than the currency itself – which is (that something else) of value. Fiat currency entitles the bearer to settlement of tax liabilities. Bank deposits entitle the owner to on-demand access to fiat currency, backed by the balance sheet of the bank. Gold-backed sovereign currency entitles the bearer to settlement of tax liabilities and, at least notionally, a quantity of gold.  Stock (often used as currency) entitles the owner to profits from a business and liquidation value of any excess over liabilities. Stock options entitle the owner to the purchase of stock at a particular price. Etc, etc.

Bitcoins entitle the owner to nothing at all.  Their ‘value’ actually is purely conventional, based on the deluded notions that people trading in them have about money.  They have approximately the same intrinsic value as a photograph of someone doing something stupid.

Note: I am sure there are old posts here, which I leave in place for the record, where I accepted the fairly conventional view that money is ‘nothing in itself’: that it was simply based on a vaporous ‘full faith and credit, so use it dammit’ assertion by the sovereign.  I was never especially comfortable with that view, and in recent years I’ve come to better understand why.

Valuing nothingness

October 29, 2015 § 48 Comments

19 Their silver shall be cast forth, and their gold shall become a dunghill. Their silver and their gold shall not be able to deliver them in the day of the wrath of the Lord. They shall not satisfy their soul, and their bellies shall not be filled: because it hath been the stumblingblock of their iniquity. Ezekiel 7:19

I’m a metaphysical realist.  What that means to me in very general terms is that I accept that things have objective essences independent of the subjective perceptions or projections of human beings onto things.  It isn’t that the perceptions of the subject are irrelevant; it is that objective reality is not reducible to nothing but the perceptions or projections of subjects. Objective reality is not reducible to perception, will, or desire. Intentions and desires matter, but they are not all that is the case.

This affects how I approach everything, and in particular it affects how I approach questions about property, money, finance, etc. This puts me in conflict with all modern schools of economic thought, because all modern schools of economic thought are metaphysically anti-realist. To modern schools of economic thought, economic value is reducible to the subjective perceptions or projections of groups of people (markets).

So the fact that markets – groups of people – perceive gold as valuable and act on that perception is taken as proof that gold actually is just as valuable as they perceive it to be. And the fact that this value arises almost entirely from purely subjective evaluations, as opposed to arising from any useful objective qualities of gold, is taken as a virtue of gold qua ‘store of value’. Gold’s relative independence of any actual objective usefulness is the very thing that makes it a pure store of value.

The most pure form of anti-realist value is distilled and concentrated human subjective evaluation: value with no object. The only thing more pure than gold would be nothing at all, but of course even the most ardent anti-realist cannot escape from objective reality.  Because he cannot store pure concentrate of human will in a vault, the anti-realist stores gold; because at least as an historical matter gold is the substance that human beings have most irrationally desired, desired in a way most purely disconnected from objective reality.

What is fantastically ironic about the whole situation, from my perspective, is that so many people flee to the idea of gold and gold-backed currencies in order to escape what they think of as the unreality of finance.  Indexing all of economics to gold, they think, will somehow anchor economies so that they cannot be manipulated by banksters and plutocrats.

But you can’t escape from unreality by fleeing into it.

UPDATE: Added epigraph.

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