Wayne Post
  • WES GIFFORD: Too much 'fake money' out there

  • First, let us understand that banks create debt, not theirs but yours and mine.

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  • As anyone who knows me can attest, I know very little about investing and making money. My wallet is black and blue all over from the beatings I have endured. Since I have absolutely nothing more to lose, I can safely discuss this subject.
    While in high school, I had a part-time job as a stock boy at a local men’s clothing store. One of the owners, Bernie Shenkman, who traded in the stock market, announced sadly one morning, “I’ve got the shorts.” I thought he was talking about the underwear department and sought an explanation. He then attempted to explain “puts and calls” and how, by buying a stock “short,” one could make money when the stock price went DOWN. This information was completely foreign to my understanding and was therefore rejected out of hand. Bernie had one saying that has stayed with me over the years: “Money is like blood. It’s no good to anybody unless it’s circulating.”
    At this point, I am reminded of another related story involving a cord of wood. Some years ago, I needed some firewood and responded to an ad I saw in the “Penny Saver” for delivery of a “cord” of wood for $35.00. I called the South Bristol woodsman and set up an appointment for delivery. He arrived with his burly helpers and unloaded the sticks. When finished, I examined the pile, determined it was only half a cord, two by four by eight, and registered my complaint with the tradesman. He told me it was a “face cord” which was a common term in the business. I replied that I would pay him with a “face check.” The entrepreneur and his three husky helpers were not amused. I got a short load and was required to pay the full amount, which brings us to banks, money creation and the debt crisis.
    First, let us understand that banks create debt, not theirs but yours and mine. Believe it or not, this is how it works. Let’s say you go to the bank and borrow some money to buy a house. You sign an IOU to the bank and put the house up as collateral. The bank deposits money into your account and you buy the house. Now here is the rub. Where did that money come from? It came out of thin air. Oh yes, it did. The bank is allowed by law to loan you money it doesn’t have. They can loan nine dollars for every one it has on deposit. Now the seller of the house puts the money in the bank, allowing for another nine-to-one split and away we go again. Failing a better term, let’s call it fake money.
    Now don’t get me wrong. The ability of banks to create fake money is generally a good thing. It provides the means whereby the economy can expand and grow. New homes, buildings and factories, more productive machines and equipment, and greater employment opportunities are a few of the benefits. However, like too many huge whipped-cream covered hot fudge sundaes, excessive lending of tons of fake money can be too much of a good thing and bodes dangerous and unwanted results called balloons. This is exactly what happened in 2008 and years preceding. Too much fake money being loaned to too many folks who couldn’t afford to repay it. So banks create fake money, loan it out, and then have the gall to insist on being paid back in real money. When you fail to do that, they take your real house and you wind up on a real street corner, sitting on your real keester, awaiting the oncoming real cold weather.
    Page 2 of 2 - Since the debt was largely created with fake money, let’s pay them back with fake money and let the devil take the hindmost. A little inflation would help. Borrow fake money and pay it back in fake money.
    Wes A. Gifford, a lawyer and one of the founders of Sonnenberg Gardens, lives in Canandaigua.

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