The massive problem with stress testing the capital reserves of banks is that the process is underpinned by false asumptions about risk and economics.

Primarily, this is because the question is phrased as ‘do they have enough?’ when it should be an absolute question: ’should a bank have full reserves or not?’

Stress testing assumes the fractional reserve system. As disciples of the Austrian Economists we fundamentally disagree with the system at this level. We therefore cannot take a stress-test seriously because anything short of a 1:1 ratio of deposits to loans is effectively counterfeiting.

You cannot loan and earn interest on money that you do not have. If I deposit funds with a bank for safe-keeping and the bank makes money on providing use of those funds in the debt market, fine. I agree with that - we all may need a credit facility to address difficulties in cashflow. However, no one has authorised any citizen or corporate entity to counterfeit. There are practical as well as moral implications here, apart from the terrible financial situations arising out of debt-based economies, there is the problem of the longevity of these debts. If the money that is leant by banks is subject to interest, and that money did not exist in the first place, then effectively, while the money that is created goes into circulation and dilutes the value of currency, there is not enough money anywhere in the economy to pay back the interest. This means two major problem - that the economy cannot sustain itself without debt, because the only way to create value in goods and services becomes to ease credit markets so that consumers will spend more readily, and that our debts to banks will never (ever ever) be repayed.

Great post on Kate Carruthers’ blog. I ended up posting an incredibly long-winded comment because I really think this raises some brilliant questions about warfare, soldiery and humanity.

We engage with each other through political models, so devoid of substance that they tend to mean nothing to the people. There are two models for one’s life that seem to be possible: an employee or slave based economy or a merchant-based economy. Either the people are workers and value jobs, or the people are merchants and value independence.

Employment is only possible through price fixing in the marketplace - without minimum wage, your neighbour, trying to remain competitive, lowers his hourly rate, so you lower yours, then he lowers his and so on until you both sell yourselves into slavery or start a small business. By imposing a minimum wage, the government creates a false sense of demand for labour - so more and more people give up their independence and take jobs, which amount to the sale of time. Now the market for human time is vastly oversubscribed and becoming more and more globalised. Without fixed prices people would not seek to rely on employment - for it is foolish to rely on such a market existing indefinitely, as people are just now realising. This kind of government meddling seems good for the people, but by weakening them, it is actually a terrible disservice. By sparing the people any hardship, they are left wondering where it all went wrong with no idea of how to get out of their situation.

Fear and greed grow government through the exploitation of an alarmingly prevalent modern Robin Hood mentality. The laziness of the many latches on to the idea that wealth is immoral and the wealthy undeserving, and by sanctioning the idea of theft, the people allow themselves to be taxed. When you read the history of income tax, you see very quickly that the people were punished because they gave into their greed.

Now, I don’t blame anyone for the notion that wealth is evil, because the route to wealth is skewed by government, not an uncommon problem throughout history: writing in the fourth century BC, Lord Shang says: “The means whereby a ruler of men encourages the people are office and rank; the means whereby a country is made prosperous are agriculture and war. Now those who seek office and rank, never do so by means of agriculture and war, but by artful words and empty doctrines. That is called ‘wearying the people’.”

Lord Shang wrote that the ruler of a nation must make the only avenue to prosperity industry, so that the people shall work to enrich the nation instead of seeking wealth through licentious behaviour. Where Shang writes war, we should see that while conquest may enrich a nation (or acquisition a company), prolonged war destroys all parties to it (as prolonged mergers destroy both companies). We don’t need any parallels where government is concerned - the more people you have managing a nation, the fewer you have to work.

The best things in life are nearest: Breath in your nostrils, light in your eyes, flowers at your feet, duties at your hand, the path of right just before you. Then do not grasp at the stars, but do life’s plain, common work as it comes, certain that daily duties and daily bread are the sweetest things in life.

- Robert Louis Stevenson

I found this glaring at me from Old Soul Ink and I glared back. I think to myself: that’s very pretty, I just wish I could believe it. The trouble is I’m just too revolutionary for Stevenson this morning. Or perhaps any morning. There’s logic in the sentiment, but for me the thought depends upon too much: that your days satisfy you, that your world is whole, that you are free in your quiet way.

I found it ironic that I should enjoy this quote when everything I write about work tends to advocate dissatisfaction. Stevenson says do your duty and I admit to being seduced by that idea, because there is wisdom in gratitude. So this becomes the great mental balance to strive for: to be grateful for all your blessings while also recognising your hunger. I can’t recall many men who have attained this state of ambitious elightenment. The pursuit of this balance is maddening: I can’t become a philosopher because there is too much work to do; I can’t become a slave to work because the world is wasted on slaves.

And what a world, and what a change is upon us.

The world is built in value, as our fundamental understanding of things seems to be imbedded in a need to quantify and compare the value of everything around us.  Like a dog hoards trophies, a man hoards money. But our masters steal from our baskets while we are not looking. We return every day to our beds with that uncomfortable, gnawing feeling that we’ve misplaced something.

This petty theft everyday of currency dilution.

I long to know capitalism; all I’ve seen is socialist debtism. I long to know plenty; all I’ve known is the poverty of waste. I long for a little justice, a little wisdom, a little goodness.

There is no democracy, no equality, no security, no liberty without contancy, certainty, the surety of the value of what we possess. For a man makes his home in society in order to protect himself from thieves and wolves, yet we are beset by them.

I am not asking for a revolution of ideals. I am not asking for a change of political creed. I am saying that we should believe in the concepts we cheapen by letting them drop idly from our mouths. The dream that is capitalism has never been realised. It is still conceptually perfect and good, though we taint its name, and blame its ghost for our own political sins.

Go forth then, and pursue real riches. Do not cast your eyes to the ground, do not find satisfaction in your slavery, nor walk meakly through this world, but hate those paper bandits, taxes and bureaucrats.

This sky on her knees,
Black in crazy occasion,
Moves against us; she
Drizzles her approving lips
Up your neck and storm-edged hips.

So, we’ve become wine
Running cherry guitar steel,
Drenching you, each tine
Of your red, fork-tongued beauty
And slyly stealing pretty.

Although, of course,

The significance of now is not lost on me,

Here’s one penitent look back

At dreams that fed themselves on dreams

And words that have no meaning nor end

And a way to send

Flowers into the oblivion of hope

And rhymes that have the effect of soap

On my old soul.

My old soul limps slightly on the right leg

And stares into the edge of anything

Because I’ve learnt to live on

Horizon

And the shy smiles of women

And the sweet taste of water on skin.

No, the night is not so long that I will forget you

Nor so dark that you will not find me

With all the trains of silked light here to bind us

With such a length of bed to buy us time.

For there is no morning until the morning;

There is no end until the end.