The Seven Pillars of the Matrix

“None are more hopelessly enslaved than those who falsely believe they are free.”

― Johann Wolfgang von Goethe

Contemporary baptized, corporatized and sanitized man rarely has the occasion to question his identity, and when he does a typical response might be, “I am product manager for a large retail chain, married to Betty, father of Johnny, a Democrat, Steelers fan and a Lutheran.”

His answers imply not only his beliefs but the many responsibilities, rules and restrictions he is subjected to.  Few if any of these were ever negotiated-  they were imposed on him yet he still considers himself free.

But is free the right adjective for him, or would modern domesticated simian be more apt?  He has been told what to do, believe, think and feel since he can remember.  A very clever rancher has bred billions of these creatures around the globe and created the most profitable livestock imaginable.  They work for him, fight for him, die for him, believe his wildest tales, laugh at his jokes and rarely get out of line.  When domesticated man does break one of the rules there are armies, jailers, psychiatrists and bureaucrats prepared to kill, incarcerate, drug or hound the transgressor into submission.

The Moral Hazard of Modern Banking: How Banks Create and Destroy Money

The Money Lenders by  Quentin Metsys - 1466

"I'm just a banker do doing God's work."  Lloyd Blankfein

Much has been said about both the moral hazard of banks being bailed out and people bailing out of mortgages. The major question raised was, would this ‘bailout’ contagion infect the integrity of our economic and political system?  But far more interesting and much less discussed are the mechanics of modern banking and their moral implications.

During the housing boom trillions were loaned out in mortgages creating a housing bubble and the eventual collapse of the financial markets. But where did all that money come from? The vast majority of people think that banks borrow money from the Fed or depositors at one rate, lend it at another and make a spread. This concept is completely false. Banks create money, loan it out, make their margin through compound interest, and destroy the same money that they created as it is paid back.

The Mechanics of Fractional Reserve Banking

The mechanics of modern banking are opaque, misunderstood and arguably dishonest. Modern fiat money, the dollar, euro, yen etc are all based on debt. For every dollar in existence, there is somewhere an IOU for the same amount. This is best illustrated with an example of a typical mortgage.

Imagine Jack wants to by Jill’s house for $100,000 and he has no money to buy it so he goes to his local bank and asks for a mortgage which is approved. The bank will ask Jack for a promissory note, an IOU, for the $100,000 and once he signs it, they open an account in which they create from nothing $100,000 for Jack in exchange for his IOU. That $100,000 is a liability for the bank, their asset is the IOU. The bank just ‘created’ $100,000 which is backed by the good faith of Jack to pay it back as well as the deed to the house he bought.  Now the bank loans that money to Jack, with compound interest. The interest is the fee the bank charges for monetizing the debt. Jill would not have wanted an IOU from Jack for the 100K, so the bank did him the service of converting his IOU into dollars, and for this service they charge him interest. As Jack pays down his mortgage principal, the value of the IOU will be drawn down as well, until all the money ‘created’ is destroyed, and the IOU is worthless.

Are Cats a Higher Life Form?

I have a good friend who is very intelligent. She is a highly educated scientist and I would say that her IQ is in the 135+ range. But not only is she very intelligent, she is unselfconsciously intelligent, which is a refreshing trait in today’s self-congratulatory culture. Remember when athletes didn’t jump up and down like little girls every time they did what they were being paid millions to do? Thank God for baseball, nothing like a 95 MPH fastball up and in to shut up a blowhard. But back to cats.

My friend is not only very smart and unpretentious, she is a genuinely good person, you could say she is very kind, maybe the “most good” person I have ever known. She never makes grandiose statements, never gives big speeches, and her most common answer is ‘maybe’ or ‘I don’t know.’ So yours truly feels like a stupid, pedantic and evil human in her presence, but that’s another story.

She has a cat named Moshe. Moshe is a black cat with patches of white on his paws and neck. Moshe is a street cat, brought to my friend’s house as a lost kitten by the neighborhood kids. He is very wild and would just as soon bite or scratch you as purr in your lap. Moshe has something of Bulgakov’s foul mouthed, vodka swigging Behemoth. When Moshe bites me or scratches me, I usually give him a good swift kick in the ass, but we have, for the most part, learned to maintain a tense truce.

Now Moshe, like all cats, is very peculiar. He is fascinated by water, like many cats, and while eating is his biggest joy, there seems to be one thing that he enjoys more, and that is classical music. If Bach is on the sound system not even the shaking of his food bag will bring him out of the bedroom to eat. And he has a strange affinity for books. Don DeLillo’s Underground, a serious tome, was on the widow sill for awhile and Moshe always rested his head on the book as if he were pondering DeLillo’s Cold War America. Watching this, I made the comment to my friend that maybe her feline companion had been a member of the aristocracy in a past life, but probably due to some homicidal tendencies was brought to the world as a cat.