Once upon a time, when terms such as “economic recession” or “business cycle” weren’t part of our lexicon, the banking industry represented the pinnacle of commercial activity – the invention of a genius, no less. Bill of exchange, otherwise known as bank draft or cheque, has an illustrius history dating back to ancient Rome. During the Harun al-Rashid era, a bank draft written in Damascus for two thousand miles away would reach its destination in two days’s time thanks to an elaborate system of couriers; and a Muslim businessman could routinely cash cheques in China drawn on sources in Baghdad.
The Italian city states, Florence, Venice, and Genoa, took banking to another level, endowing it with the modern-day connotation and meaning. Finance and credit became synonymous with banking, the lifeblood of all industry and commerce, its nerve center. It’s only through finance and credit that the Italian city states became economic powerhouses through shipbuilding, seafaring, and commercial ventures; and it was no different with the Hanseatic League or the would-be colonial powers during the Age of Exploration.
The Colonial era, marked by mercantilism, saw further extension of finance and credit, not to mention its innovative uses for the purpose of Empire-building via the installation of such entities as the East India Trading Company as joint ventures: while Christian missions served the Spanish and the Portuguese as the main instrument of conquest, for the British, not to mention the Germans and the French, trade was the vehicle of choice. And we’re all familiar, I suppose, with a rather euphemistic (though not altogether inaccurate) portrayal in Mary Poppins of the British banking system, run with precision, as the mainstay of the Empire.
In short, credit and finance which banking afforded were the necessary lubricants to keep a sound economy sounder still. Aside from providing it with a stable foundation, it allowed for its global outreach. In a manner of speaking, banking and finance, by virtue of their necessarily international character, represented the first push towards globalization, an aspect in the absence of which globalization wouldn’t be possible. While trade provided the impetus and manifested itself in the form of transactions, the (international) banking system was the glue which held otherwise disparate economies as part of a unitary global network. More succinctly, perhaps, if trade was a process, the banking system was the medium. It was so in the past, and it’s no different today.
Fast forward to the present, marked by what surely promises to be a systemic economic crisis of near-global proportions . Chronic unemployment brought about by a decimated industrial sector and increased productivity, reduced demand for goods and services due to loss of income, and a rapidly shrinking taxpayers’ base, the pattern of endless borrowing and ever-growing sovereign debt (diluted in spurts by the policy of “quantitative easing”), austerity measures designed to cut government spending in order to make up for the loss of revenue – these are some of the symptoms of an economy which, having long ceased being anchored in fundamentals, is running on fumes. And it’s a pervasive condition, characteristic not only of the US economy but also of the economies of the post-industrial West; moreover, it’s likely to spread.
Article comments
1 - jamminsue
Excellent, Roger.
2 - roger nowosielski
Thanks, jamminsue. Not that I look for it, but you happen to be one of my few fans. I wish I could say that for other BC regulars who seem more intent on grinding their ax rather than discussing matters of substance which should be of far greater concern.
3 - zingzing
a lot of what is said in this article is unfortunately true. banks have made "products" of financial schemes. and they're too complex for the consumer to understand, which benefits the bank, or the financial firm, making it fraud with legality.
banks need oversight as much as drunks do.
and #2 is prima donna.
4 - roger nowosielski
Of course I is, Mr. Zing, for it takes one to know one. But I'm a good prima donna, always showing respect and gratitude to my admirers.
I always take the time no matter how busy the schedule. I just don't understand another way, do you?
5 - zingzing
roger, #4 and #2 should meet up in an alleyway and have a fight.
6 - roger nowosielski
"Public Outrage Grows As Greece Looks For More Cuts," NPR report.
Default is a real possibility.
7 - roger nowosielski
Editors, the BC forum is next to unusable since the virus attack. Let's hope the remedy is around the corner.
8 - Anarcissie
According to this blog post and video, things are a lot worse than the mere default of Greece....
9 - roger nowosielski
Memorable quote from his report:
"Governments don't rule the world. Goldman Sachs rules the world."
10 - roger nowosielski
Another interesting aside:
The concept of trading (in futures), originated in Japan, had at its main objective to provide stability to the agricultural economy, especially the rice crop, so as to protect it from undue seasonal variations.
Fast-forward to the present, trading has become the private preserve of the speculators, and the only idea is making money.
11 - roger nowosielski
This is worth quoting from the blog:
“As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth … to provide men with buying power. … Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. … The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
Marriner Stoddard Eccles â€" Beckoning Frontiers, Chairman of the US Federal Reserve during FDR
12 - roger nowosielski
Another one:
“Corporation:
An entity with all the privileges
of a citizen with none of the responsibilities”
13 - roger nowosielski
This is a heck of a blog, Anarcissie. Comments by a blogger named "Maju" are of particular interest.
Here's his website: "For what we are... they will be"
14 - Anarcissie
I had not heard, or heard of, Rosa LeĂłn before this. Thanks for the link, and the music.
15 - roger nowosielski
Well, I posted a comment on Maju's blog on the EU and Eurozone -- excellent analysis, BTW, and invited him to visit this site once in a while and comment now and then -- but thus far the comment hadn't cleared yet.
Shall see.
16 - roger nowosielski
"What's wrong with the Eurozone" -- excellent analysis by the author of the blog linked to in #13.
A must read!