I did some calculations the other week..
I looked at the Australian Treasury website and found out how much money there was available in Australia. no - not the bank dollars, actual printed money. That is the amount of money there actually is.
You may be surprised what I found.
A bit of background - you've all heard of Sir Isaac Newton - the guy who codified the theory of gravity, well he was a pretty smart guy but not just in the area of physics, another thing he did was to create what became called the gold standard.
some background to that - back in days gone by we had all manner of different currencies and they could vary literally from town to town. On a larger scale, various Kingdoms and governments would coin money, but even within the areas of their dominion towns could and did have their own units of exchange. It was based on the barter system of course, but with an exchange unit. Now I know the new barter systems use the internet or some clever way of circumventing the printing of actual money, after all, that would be illegal in most places, but they are nonetheless creating a form of currency (or money) to allow barter to take place between individuals when say the potato farmer did not want a whole cow from the cattle man, and so needed the intermediary butcher, who may or may not have wanted the spud growers potatoes. Hence money. New South Wales in Australia had it's own currency, and it was different to say Victorian currency - and there were even towns that had their own, different again.
The problem was, each town or regions money was not automatically any good in the next town over - We use smooth pebbles, they use shells - I don't want shells and my potato growing friend doesn't want them either - and neither has any inherent value - few things do, but metals have value so eventually we settled on metals. Metals are good because they are hard to obtain, they can be turned into things of different shapes like knives or bullets or nail files - and some metals are pleasing to the eye being all shiny in a world of dirt and rough sticks.. so coins were minted.
Travel from town to nearby town now and your coin was a lot more likely to be of value than a potato, a pebble or a seashell. The problem was across greater distances the metal might not be worth quite the same amount - in a copper rich area the people might have many coins and your few won't feed you quite so well. Problem. You could get around this by using coins of greater value - coins made of hard to obtain metals such as silver or gold - the likelihood that gold or silver were common any place was low so these metals were more desirable for high value coinage.
Of course you still had to do some work and farm or make something to obtain the coins, but it also meant you could travel to distant places and sell your stuff to get the coins. But again over distance and from kingdom to kingdom different rules may have been applied to limit the value of your coins, and in international trades this was becoming a problem.
Sir Isaac sought to solve this by setting a value on gold so that gold anywhere, in any form of coin was by agreement worth the same amount everywhere. It's a bit more complex than that, but that is the basic principle. This meant the Value of a Stater or a Singh was determined not by it's face value but by it's weight. It also meant that lesser coins could be exchanged based on their fractional value in currency of the gold coin (ie, 1c was 1/100 of a dollar and the like).
Now trading between regions became a whole lot fairer, and it also meant everyone's favorite people, money lenders, could create promissory notes so you could carry those around instead of your valuable gold. Promissory notes? Yes, these were bits of paper that had something like "Legal Tender In Australia" or "This Entitles the Bearer to Goods to the Value of One Shilling By Order of the Wizard of Oz" written on them. They had numbers on them too, so you could write down the numbers and if anyone stole your bit of paper you could report it and the bearer of the promissory note could be arrested and beaten with a wet cat when they tried to present it.
These promissory notes had been around a long time actually, long before the setting of the gold standard, but the gold standard helped prevent cheating. See the money lenders or 'banks' couldn't just issue these willy nilly (as some had done in the past), they actually had to have a store of gold to back the notes. Of course they cheated and in time the printing of money was taken off them by governments and instead governments took up the responsibility of printing notes and holding the gold reserves. Bankers still got their bite of the pie, they purchased and stored gold and were still able to lend it out and earn 'interest' (bank tax') - it was an uneasy alliance between the banks and the governments but it worked.
It was tricky though - money was supposed to be metal. A thing with actual value. But now we had more paper notes and the system depended more than ever on trust and honesty.
Skip through time to the '80's. Bob Hawk and Paul Keating are running the show in Australia. It's a relatively well off country, with companies and farmers selling dirt, seeds and animal hair to foreigners and taking their gold in return - and we also mined our own gold and slowly as we sell more, more money comes into the country and is spread around and we can buy cars and houses and cool stuff they make in other parts of the world. Of course the people in those other countries are buying our stuff to make clothes and food, and they are making the radios and TV sets that we buy. Farmers, fishermen, miners are pivotal to Oz though, they're the ones turning most of the stuff we call 'resources' today into profit.
The Common Man looks at the changes and says 'this is great'. Not long back, only the wealthy could afford a car, and now many working families could buy one. Not a great car, but still. If they saved they buy petrol and could go for a trip to the country to get away from town, and usually you could afford meat once a week, sometimes more! Bob and Paul looked down from on high, and their hearts filled with pity (let's call it pity) they thought it could be made fairer - they knew all people needed to get ahead was a bit of a leg up, after all, it takes money to make money, and so they relaxed the rules and de-regulated the banks.
The people rejoiced.. aaaand the money lenders rejoiced.
Before to buy a house people need a hefty deposit and proof that they could pay the money back. Now people could borrow more with less up front! The house builders also rejoiced and immediately put up the house of prices (after all, people could get more money to buy houses). The Banks rejoiced. They lent more money. Money was everywhere!
For the first time ever in Australia, people leaving school could go out and straight away get ALL the stuff their parents had accumulated after a lifetime of work, all the banks asked was they pay it off over time. Well, I say for the first time but that's not quite right - there were always the money lenders .. Hire purchase companies and the like - but we had always been warned about them, shift shadowy folk - they'd lend you anything you asked and when you fell on hard times the meanies would come and repo all your goodies and wreck your credit history, plunging you into poverty. A-holes. Actually, as much as they were A-holes they were just taking advantage of peoples greed and laziness. After all, everyone knew if you wanted something you had to save up and earn it.
But we've forgotten that. There's a lot of things we've forgotten. One thing we forgot about is how money works.
See the other clever thing the banks did is wresting back power from the governments that had protected the citizens for so long with a regulated bank industry was they talked us into accepting credit cards. Then they talked us into accepting direct deposits of our wages. Now people rarely handle cash at all. This was very good for the banks.
Somehow they tricked us into working with money in such a way as we never even see it any more. Once we don't see it, it isn't a great stretch for us for us to start treating it as though it were almost mythical. Another thing this did is stop us from looking after it properly. We don't see it after all, things we can't see get forgotten easily - it's basic psychology. And anyway, the banks do all the looking after it for us now, right? Right?
Well in the late 80's things started going a bit wonky - some banks had some problems and lost a bit of money when they gambled it on the stock exchanges and made some iffy investments. So they went back to the government armed with a cunning plan. "Hey government types" they said - and pointed out that when they retire, people draw pensions.. this is expensive for governments, you should do this thing we propose. They then explained how if people tucked away a little bit of money for later, they could pay their own way when they retire! "Maker it law" they said, "we'll look after all the money" they said, and the government saw this plan was good and thus the law was passed.
The banks rejoiced. All this money allowed them to pay off their iffy debts and continue on their merry way gambling and speculating and trying to turn a profit, but now with a steady income assured by law. They called it superannuation.
I'd also add that the banks in Oz did really well with the deregulation and the privatization of the banks. See, we were all shareholders in these banks - we depositors, every kid, business and housewife who squirreled away their pennies. We used to earn interest as shareholders, but in one fell swoop we ceased being shareholders and we became 'customers' and now they could charge US money for holding onto our cash! Not only that but an even more interesting thing occurred and it's kinda scary.
When all the Oz banks emerged from the deregulation, nervous, new and trembling into the big world of banking they were uncertain and exposed
Sounds good? sure. Reasonable? Absolutely!
Ahem. It would have been if each and every bank had not used the entire amount as collateral! Imagine I have a house and I use that as surety
against a loan all is fine, now if I had 6 other siblings who also did the same thing with this one house there would be trouble. If one of us
fails to repay our debt, the house is seized. But there is only one house and six loans.. you can see the problem? Apparently the banks can't.
They've all used this great pile of cash to leverage loans and there ain't enough money in reserve - this is what has made the Australian banks
look so good on paper, each says it has a vast cash reserve when in fact it only has a fraction of that reserve.
Scary? Wait, it gets worse.. much worse.
Remember I said banks could only loan money out if they held it in reserve? that changed too. They had to check their books before to see if
they had the money to lend. They had to have it in case everyone rushed in one day demanding their money.. well that's not the case any more.
When a person goes for a loan they simply say 'Sure Mr Brown!' and they literally invent that money on the spot. It doesn't exist. it never did.
They're not breaking the law, after all, it's not like they printed any actual money, they just made out a loan for the amount they were asked
for. And so a whole bunch of money is theoretically created which enters the system - or in fact doesn't as is the case - but the debt certainly
entered the market.
This is the magic of credit.
That borrower just took on a loan for a great wad of money that didn't exist.. and they have a legal liability to repay it in full plus interest
(and THAT is where the bank hopes to recover the actual money)
So now that money is easy to get, people ask more for their houses when they come to sell them - and since people can ask more of their bank, the
banks lend more. In time prices go up - and the banks record the value of the persons assets based on the 'value' of the houses they buy.
See this is why Australians are so well off compared with others in the world - when economists look at the wealth of Australians they count the
value of the house as an asset. you bought it for a million? right, you have a million dollar asset. This Man is Worth A Million Dollars. My,
aren't we all wealthy these days! No one is looking at the actual money we have, they are looking at assets like houses and presuming a million
dollar house is worth a million dollars.
So back to my initial statement. I did some calculations the other week..
HERE is a link to how much printed money there is in Australia this
represents the amount of gold we have to sell on the international market.
Australia has $ 32.4 billion printed or minted currency units in circulation.
So I went to the REIWA site and looked at the median value of some suburbs in Perth. I picked six at random, and worked out the value of the
houses - just the houses, not units, commercial properties or vacant land - just houses.
City Beach has 1537 dwellings (in 2011), with a median price 1 million totaling $1,537,000,000
Balga has 4206 dwellings totaling $1,673,988,000
Doubleview has 3283 dwellings, $700,000 median price totaling $2,298,100,000
Hamersley has 2047 dwellings, totaling $1,080,816,000
Inglewood has 2486 dwellings totaling $4,012,920,000
Mt Lawley has 4710 dwellings totaling $4,710,000,000
Osborne Park has 1964 houses, median value $562,000 totaling $1,103,768,000
for a grand total of $11,706,592,000
that is 1/3 of all the currency in Australia. So if roughly eighteen Perth suburbs were to sell up and demand cash - that would be every single
unit of currency in Australia removed from circulation. Every note, every coin.
1:53 a.m. - 2014-08-26
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