Banks

Also known as thieving bastards

Lets say a pint costs £3 (so £3 logically costs 1 pint), there's only £9 in existence, and I've just set up a bank.

Andrew puts £3 in the bank. I know money's not a good store of value, so I buy a pint and put that in the vaults.

Ben puts £3 in the bank.

Charlie asks to borrow enough for a pint, so I give Ben's £3 to Charlie.

Dan is wize to my shenanigans, so keeps his £3 in his pocket.

Ella, Francis and Gerry all want to borrow £3 to get a pint each. I don't have it, but I'm a bank so I just credit their accounts with £3 each, creating £9.

Whoops! I've just doubled the amount of money in existence. Simple market forces: if the supply doubles but the demand remains the same, the cost of money will half. So, £3 no longer costs a pint, it costs half a pint; or, a pint now costs £6.

Lets look at what happens:

Andrew wants his money back. I sell half his pint and give him his £3 back.

I go to Charlie and demand my £6 back. I explain that as I lent him enough to buy a pint (£3 in yesterdays prices), he now has to pay me enough to buy a pint (i.e., £6 in todays prices). I can summon a police officer to use the threat of Reasonable Force to the face if he disagrees, so he gives me £6.

Actually, he gives me £6.50 (£3, adjusted for inflation + interest).

Ben comes along. I give him his £3 back. Actually, I chuck Ben and Andrew 20p extra each (interest).

I now have half a pint and £3.10. Because I know money's quite shit, I spend £3 on another half-a-pint, giving me a pint and 10p (£6.10, in todays money).

Ella, Francis and Gerry each owe me £6 (plus interest), and Dan's pissed off that, despite having nothing to do with me, he's suddenly only got enough for half a pint.

In numbers:

Andrew and Ben each gave me £3, and I gave them both £3.20 back.
Charlie borrowed £3 and had to pay back £6.50; likewize with Ella, Francis and Gerry
Dan had, and still has, £3
I have total assets (money + a pint + debt) worth £25.60 (10p + 1 pint (£6) + 3 * £6.50 debt (£19.50) )

In terms of wealth:

Andrew and Ben each gave me enough for a pint. I gave them back just over half-a-pint's worth of wealth.
Charlie borrowed enough to buy a pint. He payed back just over enough to buy a pint. likewize with Ella, Francis and Gerry.
Dan had enough for a pint, and now only has enough for a half.
I have a pint, plus am owed enough to buy over 3 pints

wealth is going from everyone (even dan, who has nothing to do with me) to me.

Specifically, notice how much 'money' there is knocking about:

Andrew: £3.20
Ben: £3.20
Dan: £3
me: 10p

For a total of £9.50; more than actually exists! Generally, if I fuck up and there isn't actually enough money to cover my scheme the government will simply print me some more money.

It gets worse tho.

Andrew: £3.20
Ben: £3.20
Charlie: £0
Dan: £3
me: 10p + £25.50 assets

That's a total of £9.50 (actual money), or £35 (total money, including in assets).

Lucky assets != money. However, if I can somehow blur the line between money and assets (by, perhaps, trading in debt as if it was cash), then we've gone from £9 (9 of which existed) to £9.50 (9.50 of which exist) to possibly £35 (9.50 of which exist).

If we actually print off extra cash so that £35 exists, a pint will now cost approximately £12 and Dan'll be absolutely furious, to the point where he might be ruined or simply decide not to trade in money. So we can't actually do this , which begs the question:

If Ella and Gerry can't pay their collective debts of £13 back for some reason, and I've been trading in their debts with other banks etc. as if they were money; iow if £13 of the £35 is backed on Ella and Gerry, and they can't pay their debts, so suddenly over a 1/3 of the 'money' is worthless, what happens?

Recession.

So, why's this allowed? Well, the banks and the government regulate the banking system.

The banks lend the government money.
The banks complain about lack of money that actually exists.
The government say 'we've checked, and that's not your fault'.
The government print money and give it to the banks, paying back their debts.
The banking system checks, and says 'the government aren't "just" printing money to pay their debts, they're printing money to cover non-existing money'.

So, iow they back each other up. The government are allowed to print money, the banks are allowed to create money, and they both say the other's not being irresponsible.

I've also noticed that, in a recession, small businesses tend to go bust whilst large businesses tend to expand; recessions unfairly favor large businesses over small. In return, large businesses not only give the political parties cash, but also are more compliant: wanna introduce an ID-fucking-everybody policy? Betcha every Tesco's will comply, but only half the smaller offies and corner-shops will.

Big business: government-compliant, government-funding
Government: pro-big-business, manipulate the economy to allow big-business expansion; allow banking scheme
Banks: facilitate government influence of economy; government-compliant; allow government to print money
Small business: gets suppressed
Small people: get fucked.