Banking – humanconditioned

Why Life Really Is Like A Twisted Monopoly Game: Part 1

June 16, 2017June 16, 2017RobertLeave a comment

What’s the link between Brexit and the price of a tin of Baked Beans? The short answer is money. That seemingly simple thing that the rich have lots of and the poor not so much, which actually turns out to be kinda confusing. For starters, take the Brexit vote. It happens and then the pound sterling loses value. Suddenly Britain’s currency is worth less in the world and it gets pricier to import goods, so businesses put their prices up to recoup the loss and the consumers end up having to pay more on everyday goods. Meanwhile, the Bank of England recently edged a little closer to raising interest rates, which would make it more expensive to borrow money, again making it harder for everyday folk to take out loans. But what does all this financial malark mean? Well, here’s an over-extended metaphor involving Monopoly to try to explain it.

You’ve got your typical game of monopoly with plenty of players, lots of streets to buy and a bank dishing out money. So far, so simple, but now imagine that the board gets bigger. As the game progresses so new streets are built and one player, Mr Top Hat, wants to build an epic new street full of shops, houses and hotels. Mr Top Hat doesn’t have enough cash under his mattress so he approaches the bank to take out a loan. Mr Bank is pretty excited by this new development and decides to issue the loan. Hurrah, Mr T-H has the money (the credit) but is also in debt to the bank because he’ll have to pay it back with interest. Mr T-H builds the street and it’s epic. Other players buy houses and hotels on the street and Mr T-H makes a bunch of money. He pays the bank back with interest and pockets a tidy profit. Now, the other players are so impressed by Mr T-H’s success that they start doing it too and take out loans to build streets with cool amenities on them. Mr Bank sets a favourable interest rate (i.e. making it easy to take out money) and things start booming. However, because the board is growing the money supply needs to grow as well and Mr Bank creates some more cash (just like that!). More money in the economy gets Mrs Supermarket excited and she puts her prices up meaning goods become more expensive. So Mx Average Jo suddenly has to spend more money on a tin of baked beans. This whole process of rising prices and falling purchasing power is called inflation.

The players keep nipping around the board and the board keeps growing in size, as does the amount of money in the game, so inflation keeps going up too. However, too much inflation is not a good thing so Mr Bank decides to increase interest rates to make it harder to borrow money. The point of doing this is to keep inflation rising at a steady and manageable rate. Of course, it’s alright for Mr Top Hot, who is very rich, but not so good for Mx Average Jo who will have to wait for another burst of growth to inspire a drop in interest rates. But the irony of this all is that whatever Mr Bank does inflation is always increasing and whether Mrs Supermarket puts her prices up if there’s more money in the economy or Mr Bank puts interest rates up because there’s too much money in the economy, the one who loses out is always Mx Average Jo. Economic growth and inflation are two sides of the same coin. Now, what about Brexit, fluctuating currencies and economic recessions? That’s Part 2 and involves an important new player, Mr Speculator.

Why Life Is Like Monopoly (And Not A Box Of Chocolates)

February 24, 2016February 24, 2016RobertLeave a comment

So, you’ve got £200 in your pocket and you’re ready to Go. London unfolds before you – its Victorian terraces, towering skyscrapers, penthouse apartments, silver dogs and prisons. All that saving and you might finally be able to get a foot on the property ladder, it’s what you’ve always dreamed of. Yup, just a typical game of Monopoly, except this time I’m going to bend the rules a little to show the parallels between the board game and the game of life.

Let’s say there are 6 players and everyone is ready to get going. You, player 1, full of hope and aspirations start the game with £200. Next to go is Archibald, player 2, who already has £2,000,000. Why does he have such a high amount? He inherited it from a previous player. Whereas you’ll have to work hard to earn your cash Archibald will barely have to lift a finger. Unfair? Yup. That’s life. So, you keep trundling round the board just waiting to be able to buy your first little piece of land. However, it turns out Hugo, player number 3, is a member of one of the few land owning families in the country and it just so happens that his family already own a whole load of London. This means you won’t actually be able to buy the land you’ll just be able to rent it off Hugo’s family. Furthermore, because Hugo’s family have been hoarding land for so long it has become an increasingly scarce resource, meaning it’s very, very expensive because so many people want it. Better get moving round that board.

Fortunately, Hector, player number 4, is the banker and he’s there for you. He gives you £200 every time you pass Go to help you get your first foot on the property ladder. Of course, it’s not free money, it’s actually a loan and because the system isn’t that well-regulated Hector’s happy to keep loaning you money, he’ll even give you a mortgage, even though it’s unlikely you’ll be able to repay it. He also turns people’s dodgy mortgages into investment opportunities for rich people who want to get richer. Multiply this process by millions of people and when they start failing to pay off their mortgages the whole system comes crumbling down and lots of people get in debt, including you player number 1. Fortunately, Hector knows Bertie, player number 5, who is a politician, and rather than get Hector fired or even put in jail for corrupt behaviour he actually bails the bank out with public money – that’s right, he takes some cash from your hard-earned stash and gives it to Hector.

So, strapped for cash, in debt and struggling to get by you decide to make a stand. You wave a placard, you shout a slogan or two, you appeal to the better angels of people’s nature in the hope to make the system fairer. Enter Bobby, player number 6, he’s a policeman and he’s got no time for the likes of you. In fact, Bobby likes to uphold the rules of the game and he’ll lose his job if he doesn’t. So it’s off to prison with you for being a troublemaker. That’s what you get if you challenge the establishment and try to change the system. And let’s not forget some of the other players who haven’t been mentioned including Eric, the accountant and consultant who advises Archibald and his rich friends on how to avoid paying taxes; Rupert, who runs the newspapers and happily prints articles on how terrible and greedy poor people are whilst lavishing praise on the rich; and even quiet and unassuming Peter who actually works at MI5 and enjoys spying on groups of ‘subversives’ who think climate change and capitalism are somewhat problematic. He’ll happily team up with Rupert, Bobby, Bertie and the rest in order to keep the establishment in place and the masses at bay.

Life, like a game of monopoly, seems to begin and end with money. People endlessly trudge around the board of life trying to make a decent living but there’s nothing decent about money, the system is rigged from the outset. It could take someone many lifetimes to earn what some people inherit at birth. Money is not fair – it is a scarce resource that is unevenly distributed and yet it’s the item we use to access key resources including houses, land and food. Thus, objects that could be in abundance (there’s enough food on the planet to feed everyone for instance) are forced into a system of imposed scarcity making it doubly hard to get by – first you’ve got to work to get a living just so you can get the money to buy the actual things you need. Perhaps you’re thinking what I’m thinking? That it’s time to change the rules of the game…

The Big Short: Another Film About Bankers

February 16, 2016RobertLeave a comment

Some big spoilers on the way for the new film The Big Short – perhaps the biggest is that the 2008 housing crash and ensuing financial crisis happened and, as Ryan Reynold’s character reminds us at the end of the movie, it was immigrants, poor people and teachers who were blamed for it rather than bankers, regulators and hedge fund managers.

The Big Short is another film about bankers. Following closely on the heels of The Wolf Of Wall Street this film doesn’t set out to glorify the world of finance instead it explains why the financial crash happened. And it did this brilliantly. Some of the best bits came when the camera suddenly panned to a random celebrity who explained some complex financial instrument using a simple metaphor. Mila Kunis placing a bet at a poker table was used nicely to explain that the housing market was basically a series of increasingly risky bets placed on whether people would be able to pay off their mortgages (yup, bankers will find a way of making money from anything). Of course, given that the housing market was fraudulently and corruptly regulated and so many people who couldn’t afford to were being sold houses, it was only a matter of time till it collapsed. And this resulted in a simultaneous financial crash because so many ‘crafty’ bankers had been betting on the aphorism “safe as houses” remaining true. Turns out houses weren’t that safe at all.

The Big Short is about the men in the middle of it all – the few men who bothered to do their research and uncovered a system of corruption, fraud, greed and stupidity. And what did they do then? They bet against the housing market – they hoped that houses wouldn’t prove safe – and they made a lot of money. Of course, housing crises have more than financial repercussions – evictions, homelessness, unemployment, debt, social unrest, poverty and suicide are just some of the consequences. The film mentioned these things in passing but was more interested in telling a story of a bunch of wealthy, predominantly white, male hedge fund managers (another word for banker really). They even try to paint these men as morally superior because so many of them were shocked at how corrupt the system was, the system that they made lots of money from when it collapsed.

Yup, the film tried to make heroes out of hedge fund managers – people who get rich and get their clients rich by making money from money, by betting on the market. People who are rich enough themselves that they don’t need to worry about the implications of a housing crash. But they do, as do we all. Because after the crash governments around the world used public money to bail out the banks and didn’t do much to regulate them. So we can be expecting another housing crash anytime soon. And it’s not just houses at stake it’s the whole of society too – as public services are cut, as immigrants are scapegoated, as poverty and unrest rises, as extreme right-wing groups like the Neo-Nazis return, so darker days are coming. Remember what happened a decade after the huge financial crash of 1929…World War 2. I don’t know if we’re due another huge war but I do know that The Big Short barely scratched the surface of the issue. It explained the financial crisis very well but it could have done this in half an hour, but, like so many films today, it chose to focus on the actions and faces of white men with the occasional shot of a topless woman. It is a shame to realise that so many uninspiring, greedy and fairly stupid men were involved in bringing the world’s economy to its knees but do we really need another film about them?