Monday, 27 October 2008

Confidence is a preference…

Some years ago a British writer/comedian did a routine about money.

The upshot of the routine was what a load of old rubbish the stock market is.

He said that when anyone mentions the FTSE on the news we all mentally switch off and wait for the reassuring bit at the end about Pandas being flown into zoos for mating purposes before we start paying attention again.

He also said that all this confidence in the pound stuff is basically nonsense: if you walk into a pub and try to buy three pints of lager, a packet of salt and vinegar crisps and a three course meal and expect change from a pound on the grounds that you feel very confident about it right now then the chances are that the only thing you’ll be eating is a floor sandwich as they throw you out the door.

I mention all of this, of course, because the “R” word is looming ever closer to our consciousness. We’re still officially calling it a “credit crunch”, but some of the so called experts are starting to talk seriously about Recession…(oops, I said it!)

You can blame pretty much anything you want on the current downturn: the fact that history shows that there have always been ups and downs in the economy and there probably always will be, a failure to regulate banks on the part of our governments, basic greed on the part of the banks…the fact that, when you get down to it, even the top bankers are no smarter than you and me and mentally turn off and wait for the bit about the Panda with erectile dysfunction when the news comes on…

But the problem really is that our whole economy is based on an enormous confidence trick. No really

Do you have any money in your wallet/purse right now? I just pulled a £20 note out of mine (unusual for me to have so much money, but there you go) and on the front are the words: “I promise to pay the bearer on demand the sum of twenty pounds”

You see? “I promise to pay the bearer on demand” Not “This note is worth”, but a promise to supply. Its intrinsic value is nothing. If you were starving right now you could not eat this note, you cannot build a shelter with a stack of them and you cannot ward off death with them even if you wave them especially hard at people: yet people will and have killed, maimed and sold their souls over the movements of pieces of paper.

Twenty pounds of what exactly? Lead shot? Goat’s Cheese? Cinema Tickets? That’s part of the beauty of the trick – that little piece of paper can magically transform into pretty much anything all because we buy into the trick. We allow the magicians to blind us with their sleights of hand because the alternative is far, far worse.

OK, you’re probably thinking about all that money you have in the bank – about how it moves around and gets invested in properties, business shares and the like. You may even own shares in a business yourself, but are you sure? Exactly how sure are you? Have you ever seen these shares? Of course not – they don’t exist. Your shares are little more than numbers in a computer – if you went along to the local business that you own shares in with a hacksaw and demanded to take part of their bench in lieu of physical proof of your shares you would be firmly turned away. Try going into your bank, asking where your money is and asking for certificates from each and every place – you will not get very far.

But I could be wrong – because a recent report suggested that there is as much as £60 million in loose change lost down the back of the sofa’s of Britain or stored in empty whisky bottles.

Perhaps this is where the answer to the current financial crisis really lies, perhaps it is well past time that Dubya made the rounds on his Bush Mobile and begged each and every house in the world in person to hand over their spare coins to avoid higher taxes for a crisis he helped to cause?

If nothing else it would give us all something to laugh about. His only other option, it would seem, is to carry on clicking his red shoes together, scrunching his eyes closed and chanting “There’s no place with a recession, there’s no place with a recession, there’s no place…”

6 comments:

pohanginapete said...

True. Moreover, what strikes me as surreal about "the meltdown" (another term being bandied about here) is that its causes are just as nebulous as the sleight of hand trick you mention. It's based on nothing real, nothing actually productive; it arises from fears, perceptions, and second-guessing, all of which are self-fulfilling. A former NZ Prime Minister once famously described the money wranglers as "reef fish" — unable to act individually, each following the others. Maybe, in the long run (or even in the shorter term), the upheaval will prove to be just what we need to get the great mass of people thinking about what's truly important.

I'm not holding my breath, though.

Mmm... floor sandwich. No, wait... Skip the floor bit. ;^)

Don't Feed The Pixies said...

Pete - i like the analogy of the fish!

One thing i forgot to mention in this post was that i heard an urban myth about a woman who went on ebay and sold shares in her pen - one million shares at £1 a time (buyers got sent an email certificate to print). I just think this underlines the idea that something is only worth a set amount because we say it is

Lydia said...

Great essay. You pegged it. In a trunk upstairs I have a leather satchel that belonged to my grandfather in the early 1900s. It's loaded with the most artistic, colorful huge-sized stock certificates. They're worthless and I wonder what unrealized dreams they represent....

The Clandestine Samurai said...

Yes, yes, of course. A monetary note has no intrisic value in itself and neither does the digital space in bank databases that hold the numeric value representing your bank account. They are just means, something to trade in for other objects. A sort of.....materialistic power, if you will.

Here (in America), I can identify a few factors of our economic crash. There is the Keating 5 fiasco, where McCain was being paid to keep regulators off of John Keating's back while he did corrupt, faulty investing moves. There's also smaller things like a family that was recently in the news because they formed a false mortgage loan company, gave banks the addresses of a bunch of people who were "applying" for loans, then took said loans and made off with them somewhere else out of the country.

I think, when people take the pounds for nothing more than a confidence trick or a means, a function, it is ok. When people start to worship the material power those notes bring, problems arise.

Don't Feed The Pixies said...

Lydia - that's an interesting line of thought: the unfulfiled promises those documents contain

Samuria - there was a case in the UK of a man who received post addressed to his parrot and took out the promised credit card accordingly. Exactly who is to blame there? Admittedly the man should have been honest, but then the bank should have checked what species they were mailing...

Honour said...

yes, i don't understand this stuff at all - and so the most recent money scare really didn't scare me at all. it's kind of like the whole power of belief concept that you wrote about a couple of weeks ago ...