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To get a significant business going most of us would need to borrow money from a bank. We may borrow to buy parts, goods or essentials. We may also use the bank to exchange our money into other currencies when buying or selling abroad. Without these kinds of services being available business is very much harder to do.
On the other hand, the bank may offer us products that insure against exchange rates moving or interest rates changing. Additional financial products that aim, or at least claim, to take some of the uncertainty out of our future.
In the end our £1 of real money may have been part of two, three or many more financial service products. Each of those products will need to take a part of that pound. The more products we use then the more parts will be required by the bank for its costs and then its profit.
The businesses we buy from and sell to will need the same kind of basic financial services. They may then choose some of the additional services too. Again more small parts of that £1 will need to go to the operation and profitability of the bank. Then eventually the result of all those businesses working together gets to a consumer and they too can be making use of financial products like the account from which they pay, the card they pay with and other products like insurance for the card or the purchase.
In the BBC documentary one of the contributors asked the question whether we want banks to be utilities or profitable businesses. What no-one seemed to voice is that if they (the banks) are not utilities then the only place they can get their costs and profit from is by eating into each of the pounds other, non-banking, businesses spend with each other. It should be obvious but we do not grow an enormous banking economy from nowhere – it has to be powered by general commerce. Each small take by the bank is like a tiny frictional force on the progress of the general commercial economy. Assuming that banks do not over-charge for any one service then any of these tiny forces on its own is acceptable. In fact having a few of them would not seem to matter. As banking grows though the mounting scale of all the services and their accumulated tiny frictions will at some point begin to drag the rest of the economy.
With no banking nothing happens but it seems to me that there is such a thing as too much banking. Eventually we reach a point where those tiny frictional forces start to slow the rest of the economy down. A point where the friction is greater than the benefits of the bank’s services.
Where is that point? I think that is the question.
May I introduce you to World 5.
Karl Popper introduced World 4. Where World 1 was the Big Bang (the introduction of matter), World 2 was the introducion of life, World 3 was the introduction to the cosmos of Mind (the ability to reflect). Popper's World 4 is "objective knowledge" as discussed in his book of the same title.
World 4 is the product of science "common sense wit large", rational thought. Philosophy is history, we understand the world we live in thanks to science. And it advances our understanding of the cosmos at a quickening pace. For more on World 4 please see Popper, the last philosopher.
I say "the last philosopher" because he solved man's biggest problem "the epistimological problem". The only other problem "what is right/moral" had already been solved by ****.
So, if we can buck the second law of thermodynamics, and have a progression; Worlds 1,2 ,3 and 4, what is World 5? And what is World 6?
World 5 is easy. It is the limited libility company without question. The Ltd company has been the engine for putting World 4 to work and the results have been outstanding for the benefit of mankind.
The pace of the benefits produced by World 5 will only increase exponetially as World 4 increases exponentially. The future is bright. How can it be otherwise when man is a problem solver first and foremost. He is actually nothing other than a problem solver.
And, comming back to the subject of banking, the PLC that has the most significant effect on the transfer from World 4 to World 5 is banking. Investment banking in particular.
My message is:
-Get with the big picture, World 5
-Remember that a head teacher gets twice the basic pay of an investment banker. The latter only gets a bonus if he earns it. If he doesn't he gets a black bag and is shown the door. The bonus system should be rolled out to other industries like football and teaching.
-In engineering, the prime example of turning World 4 into World 5, the transfer is perfect. Planes don't fall out of the sky and bridges don't fail.
-Phama, mining, oil and gas exploration and production and other great British industries are robust in their magnificent transfer from World 4 to World 5.
-Investment banking, no greater than the rest of our wealth creating industries, but employing our best brains and our most qualified individuals, 20% imported due to the lack of local talent, is our big winner on the global market. Winners should be praised provided they haven't taken performance enhancing drugs.
David Lilley - 28 May 2013 2:50am
I have introduced you to World 5 above.
Please argue otherwise and allow me to be Socraties.