Give credit where credit is due
This past weekend, I was doing my part to support the local economy by sitting in a popular café with a close friend where we consumed a few refreshing beverages. My friend, a contractor, brought to my attention an error in my "Where did all the money go" column from two weeks ago.
Unfortunately, he took the column seriously as if I actually knew what I was talking about. Nonetheless, he brought up a valid point. The money never went anywhere. As shocking as it may be, there never was any money. That is a myth.
What we are missing is credit. Somebody took or turned off the credit and has brought commerce to a screeching halt. Nobody ran off with the money. It is still in the same place where it has always been, in the banks, where it is safe and sound.
Very few businesses operate on actual cash. They operate on credit. They buy materials on credit and sell finished products on credit. When I stop to think about it, only three businesses do not run on credit, and only one of them is legal. The legal one is insurance. When you buy insurance, you must pay with real money.
Oh, the insurance companies will set you up on a payment plan, but you are only insured until the minute you miss a payment. Then your policy is cancelled. If you missed a health insurance payment and have the need to go to a hospital, you will be given a room in a broom closet where they will hand you a bill that is probably upwards of 20 grand a day.
If you are paying automobile insurance, the day you miss a payment, you will receive notice in the mail that you can no longer drive your car because your license has been suspended because you are not insured. How they get postal service that fast is beyond me, but the insurance companies can do it.
Insurance is an interesting business, because it kind of works on the credit system, only in reverse. When we buy on credit, we take home a television, a car, or . . . a home, and promise to pay for it sometime in the future. That's how credit works.
When you buy insurance, the insurance company doesn't give you anything. They just take your money. In return, they promise to take care of your hospital bill if you buy health insurance, or fix your car if you have an accident and want to make a claim on your automobile insurance.
What they don't tell you is that if you ever, for any reason, so much as attempt to collect money from them they will not pay your hospital bill, car repair bill, or any other bill related to your insurance contract, and they will raise your payments so high that your children's children will be paying the debt. If you don't like it, then you have the option of suing them.
They can't wait for you to file a suit. It gives their legal department something to do. They have more attorneys on staff than the mob has congressmen on retainer. Go into court against any insurance company and your attorney will be facing a team of guys in gray flannel suits, each with a college degree in how to make you look like a professional miscreant. But back to the money.
The money, most of which probably came from insurance companies, is in the banks, where it will stay so the banks can say that they have the money to back up the credit they give out.
The reason nobody has any credit is because some nasty person from the government made everybody accountable for their part in the trillions of dollars of credit that keeps mounting, but never gets paid back.
Paid back? You mean, they actually want us to pay it back? I am appalled. What is the point of running up credit cards if the only thing we have to look forward to is paying the banks back? That is simply icky.
To offset this obvious errant way of thinking, the government is stepping in to alleviate the situation. The government is going to give banks enough money so they can start giving out credit again as they should have been doing all along.
This will make the biggest publisher in America, the U.S. Mint. They will print more money than all the printing on books, magazines, periodicals and newspapers combined.
Nonetheless, the credit crunch will be over and life will be back to normal with business as usual. We will continue to operate in an imaginary economy with imaginary money and everyone will imagine how nice life would be if we could pay the money back.
We don't have to worry about it, because the mint will keep printing money so the banks don't run out. That's how the economy works when you live in a system you can't understand.