Piecemeal Failure of Banks and Money

 People are looking at supply line issues as being an inconvenience. Go to your favorite store, find out they're out of Oreos or toilet paper. There are vague rumblings about Christmas being ruined this year, too, because there won't be many toys in stock. Eh, maybe celebrate the old-fashioned way by spending time doing things together as a family and getting drunk off the eggnog? The photos of ships sitting offshore is a little nice eye candy between the news reporting on the latest homicide-by-lawn sprinkler and a cute polar bear who thinks it's a kitten.

What has not really been considered, even by people who write on the subject, is that supply chain issues have a cascading effect in a world that is run on funny money. Business is conducted through debt, both short and long term. People take on debt to buy materials to make products, to pay their employees, to ship things, pay for physical plants. Shipping companies have long-term loans on their ships, credit accounts for filling the tanks, insurance, and so on. Insurance companies have to straddle the line between payouts and income (often supplemented by investments). Retailers often lease property and have to buy inventory on credit. Banks are on the hook for that credit and have to get paid or else they fail. Then there are all the people who work in the industries affected by the supply chain disruptions, or who indirectly rely on it, which is pretty much everyone outside the Inuit and the Amish. Car loans, student loans, home loans, boat loans, RV loans, a TV so big you need an extra wall for it loans. All of those things have to be paid as well. Guess who provided that debt which will be increasingly hard to service? The banks, of course.

And what about those pesky banks? They exist to make money, not just to hang on to your savings. Money is made by lending it out and expecting some additional back in return. Banks do this by juggling from one account to the next. In theory, they have to be audited for health, and have some level of insurance. Anyone who has any real faith in that system is an idiot. How can a nation that can't even get people safely out of a failed war zone even begin to get a handle on an insanely complex financial system? Not to mention the incentives people in that system have to lie and cheat to keep their jobs or their butts out of prison.

The monetary system, and therefore financial system, of America is sort of like the trust fund babies who inherit their hard-working parent's money. If they were smart, they'd live off the interest from investments. Instead, they start dipping into the principal and it becomes a vicious cycle, wind up with them "servicing" people behind the dumpster at the 7/11. In America, settlers found an unspoiled land and proceeded to spoil it with abandon. Whatever the morality of those two centuries or so, the reality is that a massive amount of wealth was created in America during that time. If people in America had been smart, what was created would have been wisely shepherded and used to create a sustainable future, where people really could have worked fifteen hours a week, lived in futuristic neighborhoods, blah, blah. Instead, people got greedy and started living off the principal instead of the interest.

So, what happened was that there was a period of time when real wealth overshot debt and the devaluation of the currency. Now, it has been reversed, and there is no way that real wealth can make up for the out of control debt and falling value of the currency. Remember, currency represents past work and production. As time goes on, and more currency is created, the less impact that real wealth has on the current monetary system. It also doesn't help anything that the people at the Federal Reserve seem to have had their hands in the cookie jar, essentially running an insider pump and dump trading scheme. Who's going to have faith in the dollar now? Of course, it's not like anyone else's currency is less bogus, just that no one pays attention to it.

It also takes wealth to create wealth. Money has to be invested, returns have to be made. Otherwise, there's no way to keep the whole thing going. Oil production doesn't happen anymore because some guy goes out and hammers a pipe into the ground. The conditions which permitted fast and easy creation of wealth are long gone. It takes massive infrastructure to explore and exploit now, massive workforces, all kinds of technology. As wealth is burned up, our ability to extract and exploit the remaining resources is going to diminish, too. We are now witnessing the decline of civilization in the most fundamental of ways now, as the complex chains which built it are now falling apart.

No, it's not a supply chain issue. It's a hold on to your hats moment, as we're about to experience a metaphorical earthquake that is going to turn modern life into rubble.