By Observer R for the Saker blog
BACKGROUND
A quick search of the internet for the term “What Russia Got Wrong” yields a lot of entries. However, a quick search for the term “What America Got Wrong” yields a rather sparse list. This is understandable since the narrative in the West has been that Russia is losing in international relations. Also, the United States (US) think tanks and government studies are oriented toward analyzing Russia, as a competitor country, and not so much toward what the situation in the US is like. There are exceptions, but these are often couched in terms of the need for more money for various US military programs. It may be useful, therefore, to look at a few topics and see how the US fares.
WHAT AMERICA GOT WRONG: MILITARY
Going forward it seems past time to consider some significant deficiencies that have become evident in the American quest to remain a great or the greatest military power. Many of these elements have been brought forward recently in pubic discussions and are important considerations in terms of weapons and military force.
The US has continued to procure weapons that many critics perceive as not suited for the modern age, or that are simply obsolete. These weapons are generally very expensive and prevent funds from being shifted to better uses. The usual examples are aircraft carriers, stealth fighter planes, littoral combat ships, and so forth. Instead, the US should have switched funding and effort into hypersonic missiles, electronic warfare, air defense systems, and perhaps more advanced submarines. Thus, the US really does have a “missile gap” to contend with. The bad name that air defense got with the “Star Wars” episode under President Reagan delayed work in that area for many years. Now it appears that at least one foreign country, Russia, is considerably ahead of the US in air defense equipment.
In addition, long ago the US set up approximately 800 military bases around the world. These bases were useful in the days of gunboat diplomacy and when US hegemony required extensive preparation for military action anywhere around the globe. Then and now these bases require a lot of manpower and funding to operate, but it is not clear that they serve an essential purpose in this age. Other countries have taken up the chore of fighting pirates and bombing terrorist dens. The US effort could be greatly scaled back.
The US system for developing new weapons and producing weapons has suffered from not “getting the biggest bang for the buck.” It is often pointed out that the US spends on weapons many times what other countries do, but does not seem to get any more or better weapons as a result. Probably the entire system needs to be rethought. One option would be to go back to having the military run some of its own factories, as in the days of armories. Perhaps a bit of government ownership would provide some competition which is sorely lacking now. The politicians even require the military buy weapons it does not want—essentially giving rise to the theory that the purpose of the Defense Department is to spend a lot of money, and not necessarily to win wars.
The US is running on borrowed money and on borrowed time, as the petrodollar effect wears out. The military will need to be downsized when the crunch comes, but it does not appear that enough thought and planning is being done to prepare for that day.
There are other areas related to the military where things do not appear to be going well for the US. A number of these are elaborated upon in a book by a former acting Secretary of Defense, Christopher C. Miller. One relates to low recruitment numbers, where a controversial, but perhaps useful, fix would be to bring back universal military service. This could actually be a combination of many kinds of military and civilian public service, including a revised and expanded Civilian Conservation Corps (CCC) idea.
This brings to mind another avenue to train young recruits in various skills, and also fix a gap in historical preservation: For example, the restoration of the last great steamship built in America, the SS United States. It was built as a passenger liner, but with the option of turning it into a troopship in case of war. As such, it was designed as very fire-proof and had a very fast speed. It could now be used as a training ship in all facets of operation and maintenance, with the graduates having a better resume for seeking jobs with the US Navy and Coast Guard, but also in the huge cruise ship armada sailing around the world. There are relatively few important passenger liners preserved today, this effort would save one of the high points of American engineering and manufacturing, in addition to developing a cadre of skilled workers who could also be able to take jobs related to the US infrastructure repair.
WHAT AMERICA GOT WRONG: FINANCE
This category contains a number of items that need to be reviewed. One such is the notion that each country needs to have a central bank. Overlooked is the fact that the US operated without a central bank for about 72 years. The Bank of the United States was ended in 1841 and the next central bank did not arrive until the Federal Reserve System in 1913. Now that the US has operated under a central bank system for a century, it seems part of the natural order and almost nobody questions it. The US public did question the notion vigorously back in the 19th Century. The point is that the US grew from a minor power to perhaps the largest economy in the world at the outbreak of WWI. During that period it fought the Civil War and the Spanish-American War without having a central bank. The financial panics prior to 1913 were offered as partial justification for setting up the Federal Reserve, but the Great Depression and numerous recessions have taken place since the central bank was restored. The US is currently in a “Great Bubble” situation, and the central bank does not appear to know what to do about it. The whole system is not working properly.
Another financial issue is that of fractional reserve banking. Most peoples’ eyes glaze over at the mention of this term and it is seldom discussed in economics textbooks. Essentially, fractional reserve banking is when banks loan out money that they do not have. When banks write a check to provide a loan, only a small part of the check is backed up by any sort of money on deposit in the bank. Banks can create money out of thin air, and the money is later destroyed when the loan is paid off. This arrangement was supposedly needed when agriculture was a major part of the economy and extra funds were needed at harvest time. The US has been past that situation for many years, but the fractional system contributes to rapid money growth during periods of exuberance when lots of companies want to expand or start up operations, and investors are borrowing money to play the stock market. This leads to bubbles such as the dotcom, the housing, and the “everything bubble” that we are now experiencing. The bubbles eventually burst. So the inception of central banking did not really eliminate the panics of the 19th century, if anything, it appears to have made them worse. Books have been written about the cause and cure of the problems of fractional reserve banking, but next to nothing has been done about it.
While not normally termed “finance,” the problem of monopolies is a constant irritant for most economies. The US solution was to pass various anti-trust laws, break up vast organizations, and restructure certain industries. For example, both Standard Oil and American Telephone and Telegraph were broken up into many smaller pieces. The railroads and the airlines were put under regulation. The banks were restructured into separate commercial banking and investment banking entities. Brokerage houses were also separate. However, some of this worked out, but some of it did not. The oil and phone breakup worked, but, in recent years, these industries began reorganizing into vast enterprises. The transport regulation did not work as the government could not set prices and service and still keep up with technological progress, so changes were made. The banks eventually overcame the anti-trust separation and merged commercial, investment, brokerage and credit card functions into other huge enterprises. The reforms of the 1930’s, instituted as a correction of the setup that led to the Great Depression, were done away with and the situation reverted to that of the 1920’s. Unsurprisingly, this, along with the banking defects, has led to the recent booms and excesses of the 1920’s all over again. Which will, perhaps, lead to Great Depression II.
It is also commonplace now to fault globalization for many of the ills facing the US. The loss of factories was allowed to proceed without a serious study of potential side effects. The notion that the steel workers could find new jobs immediately when the mill shut down was always fanciful. This was especially true in locations where the factory was the major employer and it was a long distance to any place with job openings. The lack of enormous factories and experienced workers can also play havoc with any military mobilization.
A final financial problem that the US has allowed to get out of hand is the national debt. Expert opinion suggests that the total national government debt should be kept below the Gross National Product (GNP). The US total is now above the GNP and getting farther ahead every year with the recurring budget deficits. This makes it more difficult each year to find a solution. Every proposed solution, in fact, is fought vigorously by one or more special interest groups and the outcome is a stalemate. No actual reform is enacted or carried out.
WHAT AMERICA GOT WRONG: TRANSPORTATION
The obvious mistakes here include letting the Interstate and Defense Highway System decay for lack of maintenance and failing to fill in the system’s missing links. The interstates were designed back in the era of President Eisenhower to match the distribution of population and economic activity at the time. That distribution has greatly changed since the 1950’s, but the highways have not kept up. For example, I-66 should have been completed from Washington, DC onward to Ohio instead of leaving large gaps of primitive roads between stretches of super-highways. There are missing links between Denver and Salt Lake City, between Denver and Dallas, and numerous other major cities.
In addition, the design of the interstates routed them into city centers instead of bypassing them. The result is that highways are overcrowded with commuters. This prevents a smooth flow of traffic between states, which was the original reason for the highways. Also, many of the routes into or through the cities were never completed. For instance, I-95 was built into Washington, DC, and then stopped, with a large gap before resuming on the other side of the city. This forces through-traffic to go around the city using the Capital Beltway, making more congestion and slower speeds, besides wasting fuel.
In this case, one potential solution could have been to build a separate super-highway located just to the west of I-95 designed to avoid both local and commuter traffic. It would have allowed free-flowing traffic between Maine and Florida, thus serving both a civilian and military purpose. Therefore this highway could have been called “Military Road Number One” (MR-1). The original interstate system under President Eisenhower was also designed to support any possible military use.
Another aspect of transportation where America missed out concerned railroads. There should have been an “Interstate Railroad System” designed and built along with the highways. Long distance trains suffer from the same problems as long distance trucking in having to go through the centers of towns. This creates slow movement of goods and increased danger when accidents happen. The news is full of stories about trains derailing inside towns and cities and consequently dumping hazardous materials into the water and air. There are also the continuous numbers of accidents at grade-crossings, which should have been eliminated on an interstate rail system.
The lack of large-scale transport manufacturing programs in the US can be seen in two cases where the US should have excelled: constructing cruise ships and building supersonic airliners. Cruise ship companies now have to order their large vessels from yards in Europe, especially from Norway, France, Germany, and Italy. These are not low-wage countries, so that is not an excuse for the lack of US shipbuilding. In addition, although the Europeans built a supersonic airliner many years ago, this was not followed up by the US. The excuse was the sonic boom problem and the apparent lack of commercial profitability. Now, with the large and increasing amount of traffic going across the oceans, it would seem desirable to have a faster means of travel. Perhaps a small amount of the money expended by the Pentagon could have been diverted to design a game-changing US plane built in the US and sold to the world’s airlines.
WHAT AMERICA GOT WRONG: CULTURE
An important factor that is seldom covered in the national security literature is that of the impact of national culture and its various aspects, especially religion and sexual rules and practices. There is relatively little discussion in public foreign policy articles as to whether religion, or lack thereof, or its form and type makes any difference in the overall extent of national power in international relations. Some of the questions relate to whether a country gains by having a religion to promote certain codes of behavior that support rules the government is simultaneously enforcing. Following that, what is the impact of having a “state religion” as a focal point to advance both church and state interests?
Both Russia and the US have at various times been “Christian” countries and both at different times have been “post-Christian” countries. Generally, and very roughly speaking, Russia, during the Soviet period was in the “post-Christian” camp, while the US was in the “Christian” camp. Then after the Soviet Union imploded, both countries switched sides. Does this make any difference? There may be two approaches to the answer: First, the Soviet Union eventually dissolved and the issue is whether culture policies may have had something to do with that ending; Second, decades ago a scholarly work on the subject of sex and culture was published by an English scholar at Oxford and Cambridge. Examining it may assist in considering the current issues related to culture. A summary of his findings is as follows, taken from the book cover:
“Originally published by Oxford Press in 1934, J. D. Unwin conducted this landmark study of 86 civilizations through 5000 years of history and found a positive correlation between the cultural achievement of a people and the sexual restraint they observe. The evidence is that human societies are free to choose either to display great energy or to enjoy sexual freedom; it appears they cannot do both for more than one generation. The whole of human history does not contain single instance of a group becoming civilized unless it has been absolutely monogamous, nor is there any example of a group retaining its culture after it has adopted less rigorous customs.”
This area of scholarly inquiry has received little attention in the major magazines dealing with international relations and national security. It would seem important to check out the Unwin study and the other aspects related to it. Are his findings still valid? To what extent did the “post-Christian” camp adherents “adopt less rigorous customs”? If they did, and the Unwin findings are still applicable, then the countries that have gone “post-Christian” will be at a disadvantage in international competition.
Culture is becoming a war, like psychological, economic, chemical, biological, legal, and other wars, between Russia and the US. This week the president of Russia gave a speech in which he excoriated the West for its attacks on Russian culture, the Russian Orthodox Church, and other churches. He specifically denounced the West’s treatment of family life and various sexual behaviors.
WHAT AMERICA GOT WRONG: HEGEMONY
The US government is currently trying to maintain, or hang onto, the extent of hegemonic control it has throughout the rest of the world. The preceding sections of this paper address many elements that are going wrong and how difficult it will be for the US to be successful. There are even more problems that are not discussed, such as healthcare and education. The government in Washington seems blind to the fact that the US is sliding into a form of isolationism. Other countries are increasingly going their own way and declining to take orders from Washington. The US is picking fights with Russia and China at the same time—oblivious to the fact that the US will lose the contest.
However, even parts of the US Establishment evidently begin to sense that all is not right, for the latest issue of Foreign Affairs published an article by Andrew J. Bacevich that contains some hard truths:
“A combination of grotesque inequality and feckless profligacy goes a long way toward explaining why such an immense and richly endowed country finds itself unable to contend with dysfunction at home and crises abroad. Military might cannot compensate for an absence of internal cohesion and governmental self-discipline. Unless the United States gets its house in order, it has little hope of exercising global leadership—much less prevailing in a mostly imaginary competition pitting democracy against autocracy.”
References:
Soldier Secretary, Christopher C. Miller, Center Street, 2023
The End of Alchemy: Money, Banking, and the Future of the Global Economy, Mervyn King, W. W. Norton, 2016
Sex and Culture, J. D. Unwin, Oxford University Press, 1934
State of the Nation (address to the Federal Assembly), Vladimir Putin, President of Russia, February 21, 2023
The Reckoning That Wasn’t: Why America Remains Trapped by False Dreams of Hegemony, Andrew J. Bacevich, Foreign Affairs, Volume 102, Number 2, March/April 2023
Eventually, the finger will point at Vicki Nuland, her family and their claque. Everyone will see that it does. People as individuals and societies pay dearly for denying God’s universality, that He goes where He wants when He wants in any name or form He wants.
Recognize that truth, and live it, and you’ll have your trains by-passing modern town centers. Realize, however, that those trains originally ran to or became those town centers — with factories and warehouses — because that’s where they were wanted and their owners could earn income.
Somewhere the idea of making money replaced the idea of earning income. That was the headlong pitch into immorality, which is the headlong pitch into heartache and dissolution. Anyone who talks about making money as a worthy goal is dangerous to themselves and everyone else. They should be shunned.
Ukrainian butt-hurt Jew, what can you espect?
Concerning Rev Grahams mentioning of Nuland’
Yes indeed the anglosaxons like to believe that the jews control them. However the only way to find out if they have any separate power would be if they used their influence in an entirely different direction no longer identifying with the imperial agenda, which is about the prevention of any strong rival to emerge.
The way I look at it the neocons are actors identifying with that agenda.
And I believe the empire is selforganising on the elites level. They usually have a consensus.
Israel and political zionism was created by the British masons in order to control the financiers, and not at all for to be good to the jews.
The size of Israel was chosen to be too small for the jews to make it on their own but sufficiently important for the financiers to have to care for it.
Churchill suggested that an intensely patriotic race of 3-4 million were to live there.
Both inside the masonic power and in politics Disraeli was a subordinate to Lord Palmerston and against the interest of the jews Disraeli helped spread the false impression that the jews controlled the freemasons. This lie was believed by most including several jewish authors.
Thanks to an Irish author and priest it was revealed that Palmerston had secretely taken control of the masonic networks in 1837 which was later covered up by the masons in ingenious ways.
The anglosaxons are not all ignorant about this but never bring it up in connection with the whole narrative about jewish power.
The victorian era was decisive but important details are blanked out from most accounts and this still matters to this day when the anlosaxon empire is raising the stakes like it does.
And they still need to use those jewish actors as fronts.
Good article. Just the fact that ordinary Americans allow the government to deny them their simple Bill of Rights which were limits on the power of the Federal Government is reason enough for America to implode. The pandemic proves we in America are a subjugated people. At least within the US it will be just like Star Wars, a small resistance vs. the Empire.
Only just now discovered, and subscribed to newsletter of
https://www.rbth.com/
‘Russia Beyond”
Good Stuff!
https://en.wikipedia.org/wiki/Russia_Beyond
…
Russia Beyond (formerly Russia Beyond The Headlines) is a Russian multilingual project operated by TV-Novosti (formerly Russia Today), founded by the Russian state news agency RIA Novosti.[2]
History
Russia Beyond The Headlines was launched in 2007 by the Rossiyskaya Gazeta, a newspaper published by the Government of Russia. The first publisher of the project was the deputy CEO of Rossiyskaya Gazeta Eugene Abov.[3]
On January 9, 2016, RBTH became part of TV-Novosti whilst retaining its own distinct brand.
In 2017 the project dropped all printed versions.[4]
On 5 September 2017, RBTH dropped the last two words of its full name, becoming Russia Beyond. Russia Beyond is managed by a section of the news agency TV-Novosti.[5]
…
Going off-topic. Would have been better in MFC. Please put there next time. Thx. Mod.
I ran into this, Russia Beyond, while doing a bit of research about Russia, and opened
https://www.rbth.com/travel/330843-list-of-russian-regions
It turns out Russia, while a federation or country is almost a plural word in a sense, comprised of many parts (not a monolithic autocracy as US propaganda would have it).
The photographs are amazing, and the link to https://www.rbth.com/multimedia/pictures/2016/08/08/altai-landscape_618099 shows stunning landscapes.
There are a great many fascinating articles at the rbth site, some about russia and some about ‘stuff’ — as I used to see at PBS TV, before it became all US propaganda and I threw out my TV. Recipes, Russia history and geography, Russian cat names, culture and art — all kinds of stuff.
OK. Will do. Thanks.
I had thought it was topical to ‘what America got wrong’ because Americans know so little about Russia or Russian Culture, and get most everything US says about Russia wrong, while also talking about ‘Putin’, personally, instead of the vast and diverse Russian federation and population — much more diverse, and unpredictable, than the US I’d say.
Russia gets thing wrong — makes mistakes — of course, in many different ways, but the US seems to always get thing on about the same way and makes the same mistakes, never learning from experience, or even admitting it’s fallible or limited, in its arrogant and tightly controlled bubble thinking.
“A final financial problem that the US has allowed to get out of hand is the national debt”
There is in fact no need for any sovereign government to go into debt in order to create money as a medium of exchange. Presently in the US it is the commercial banks, such as Bank of America, JP Morgan Chase, Wells Fargo et cetera, who create all US money ex nihilo as compound interest bearing debt every time they make loans to the US Treasury, corporate entities or individuals, so that no debts = no money. Thus if all the debts were paid down there would be no money.
It is not necessary for the US Treasury to incur debt in order to create money as a data entries on its computer to provide the funds needed for all government expenditure without taxation. This is exactly what China is doing via its government owned central bank to create its domestic currency- the yuan – without incurring any debt whatsoever to private banks to put their workforce to good use building infrastructure and industry.
The only functions of taxation would then be to control the rate of inflation of the currency by deleting a fraction back out of existence as necessary and to redistribute incomes more equitably.
Correct! The ‘modern montary theory’ people explain this, and it should be understood by all.
Yet it should also be noted that’s we want a (responsible and honest) central bank for both facilitating financial transactions, and for regulating money creation and stopping fraud to begin with. In addition attention should be placed on how created money is spent because it is supposed to represent real weath in the real economy, and using money to fight absurd wars, buying exorbitant weapons to blow up or give to nazis and tyrants, or be stolen by thieves of the corrupt ruling class and autocrats, drains the real economy and the the wealth of the working people, as we see.
Proper debt, whether by borrowing from banks etc. or creating money by the government should be used as investments in either needed projects such as necessary social spending or infrastructure maintenance, or developmental projects which are reasonably expected to increase real wealth.
Good economics is about seeing and dealing with reality. (And history, as Michael Hudson explains).
BTW, one other possible function of taxation is to regulate various activities, such as taxing building on or investing in real estate, stock market profits, gambling casinos, or creating pollution, although it is often overused and not the best way to address such issues. Again, we need to look at the reality and the entire system with all of the causal factors and consequences. There is no free lunch especially when we are out of food.
So the USA got wrong in almost everything huh? I agree.
A fairly comprehensive summary. Military and Financial deficiencies of NATZO countries have become obvious — the inevitable softening after four decades (1980-2023) during which NATZO has squandered its “irresistible armed might” on expensive luxury wars against tiny countries like Serbia, Libya, Syria, Afghanistan and East Ukraine.
Deficiency in Leadership by the EU$A are likewise obvious — in fact, glaring.
But EU$A deficiencies in Transport and Culture are less obvious, even debatable. Though, come to think of it, Culture includes social cohesion and public morality — both of which influence Military and Financial performance. It is interesting that Afghanistan (the one small country which defeated NATZO) and the three medium-to-large countries which NATZO dare not invade (Iran, Russia and China) are very strong on Culture ie, Religion or Ideology, Morals, Social Cohesion and Traditional Family Values. Also, China is mad keen on Transport: its New Silk Road is the global BRI.
Nice read Observer R, thanks.
You could pen volumes with that title over 3 life cycles.
What the America got wrong: how to indicate a big main road.
interstate, highway, freeway, expressway, parkway, turnpike, driveway, route, and so on.
For once, the UK got it right. It’s either an M-road (motorway), an A-road (trunk road), or a B-road (not-so-big main road).
USA also needs a revolution in the way coffee is sold at most restaurants. The coffee sold at Mcdonalds, fast food restaurants and gas stations and food stores is too watery. I have never understood the reason of why coffee sold at restaurants is so watery. USA needs a revolution in the way americans eat and in many other sectors
Hi, i haven’t read the article yet, but I assume it’s pretty good, because i am an observer of the behaviour patterns of the general american population, I live in Knoxville, TN and since I love psychology, psychiatry, sociology, politics, etc. and I am a highly sensitive person (HSP), like The Saker owner of this blog, like Putin and many sensitive people of the world, the behavior patterns of most americans contradicts the christian morality and socialist collectivist cooperative morality of USSR and nations with leftist governments. Americans tend to be very very self-absorved, almost to the point of suffering from narcissism, paranoia, toxicity and many other negative behaviour of the sick USA. The country is wrong not only politically but the country is a mental hospital. I don’t really know why most people in USA are so neurotic and self absorved, it must be (according to Marx) and ideology coming from the ruling classes. And that self-absorved mysanthropist ultra-nationalist behaviour of americans is against world peace, it is very compatible with the objectives of capitalism and US Imperialism
Wow, what a great part, about the transportation system of the USA which is anti-scientific and as a result there is a lot of traffic jams and transportation problems for regular people, this happens in many countries, with anti-scientific urban planning, for example the capital city of Mexico has about 20 million citizens, that is so crazy, no wonder is so much crime in Mexico. The wrong urban planning even has negative psychologic impact on people. I’ve been reading books about traffic engeneering from http://www.pdfrive.com and they say things that you say in this article. Thanks a lot for your great scientific analysis of what is wrong with the whole USA
.
A vast website on how to move people within cities:
https://www.carfree.com/
I was going to add to this article, about the way the houses are built, which are mostly built of weak material like wood etc. which are not good for hurricanes, tornadoes and other weather problems, and that they should be built with concrete blocks and cement, but I might be wrong, maybe the excess of buildings made of concrete might contribute to earthquakes (since i am not a scientist in the environmental problems
The list of things the US gets wrong in my book, even in comparison with its European ‘allies’, is a long one. I think one example, however minor or petty* it may seem for everyone else, is the physical monetary system. Just looking at coins and notes of the euro made me realize how obsolete and outdated the US dollar really is.
(*Even small details can say a lot about the (mis)management of a nation.)
1. Unlike every other major currency in the world, the US dollar has its notes printed in the same color and size.
2. Pennies are still in circulation even when nothing sells for one anymore. It costs more than one cent to mint a penny. In 1982 costs of copper became so high that they switched to copper-plated zinc. Zinc is toxic when swallowed – it damages the stomach lining. (The euro 1- and 2-cent coins are minted in steel.)
3. Millions of dollars are wasted on $1 bills that last less than two years. The SBA dollar was designed in 1979 to last thirty years, saving money in the process, and work with vending machines (Canada, Japan and South Korea were successful). Neither the SBA nor Sacagawea nor Presidential dollar were successful, and $1 bills continue to be printed like it’s still 1971. Loading stacks of quarters into a laundromat becomes a pain – imagine installing a modern OS with floppy disks. (The euro even has 2-euro coins!)
4. For an international reserve currency, it would normally behoove the US Mint to update the designs and have them display the nominal values of the coins in Arabic numerals instead of spelling them out in English. How is anyone who doesn’t speak English going to know WTF a ‘dime’ is?
5. The nickel costs more to mint than five cents. Its composition has stayed the same for 150 years. Its larger size and melt value per square meter relative to the dime (10c) becomes a source of confusion for foreigners. When the original silver half-dime was discontinued and replaced with today’s ‘nickel’, not everyone was accepting of the new base-metal coinage, but one couldn’t make change from a quarter (25c) without the nickel. To resolve this, a 20-cent piece was introduced, but it became short-lived as it was confused with the quarter. Darwin Awards, anyone? (The euro has a 20-cent piece instead of a 25-cent one.) (To be fair it may not have been obvious at a time when inflation wasn’t an issue. But even Thomas Jefferson wanted a 20-cent piece back in the day)
If a revolution occurs in the US one day, let this be one priority out of many.
The explanation of the fractional reserve lending is actually not completely right. Yes, it appears as if banks make money out of thin air, but that’s not what’s really happening. What’s actually happening is that the bank tells depositors they can withdraw their entire deposit whenever they want, and then lends out a fraction of it. The theory is that the depositor will not actually ever request all of his money at once so the bank will be able to pull of its charade. However, if all the depositors came to the bank at once asking for their money, the bank would be literally unable to pay them out *even though they promised them they will*!
It *appears* as if money is created out of thin air because when a bank lends out deposits in this way, they debit the loan to the account of the debtor. So the same money is counted twice – once on the depositors account and once on the debtors account. But the sum total amount of money is neither increased nor decreased. No actual money is created, it’s only accounted for “creatively”. Same goes for reporting to the government and auditors. What they ask for and what they should ask for are not always aligned.
And yes, all this was invented in medieval Italy. Ah, those Venietians and Genoese. :) BTW, some banks actually advertise themselves as full-reserve banks, which means they specifically claim they don’t partake in this.