When people are trading currencies, it means that
they see some value in those currencies and those
values shift. Actually, that would be nice.
The truth is, bankers send orders whizzing around
the planet, making trades simply to get the fees.
I had this figured out as a kid. There's no rhyme
or season to this crap.
So, the world needs bankers to trade 5 trillion
dollars worth of currencies every day.
I repeat. this is bullsh*t!
checkit: theguardian.com
The
rise of money trading has made our economy all mud and no brick
Trillions of dollars change hands every day in
the foreign exchange markets. Yet this vast industry profits from peaks and
troughs – it has no interest in a stable economy
Alex Andreou
Wednesday 20 November
2013 16.55 GMT
By
far the most destructive sentence, in terms of political engagement, is "this
is too complex for you to understand". Occasionally, I stand in front of
what I've learned on a subject, like an ant looking up at the Great Wall of
China, thinking "how do I begin to explain this to another ant?" But
it is just stone on top of stone, brick on top of brick, with a bit of mud in
between to hold them together; it is like any other wall, just a lot bigger.
We
all understand currency exchange – one national currency can be exchanged for
another based on an agreed rate. Most of us have seen it in action at one time
or another, before a holiday or when paying for a DVD on eBay from a seller
based in another country. The global foreign exchange market consists of two
elements. The first is business conducted in the real economy – buying that DVD,
providing a service to a foreign company, importing oil. The second is
speculation; the buying and selling of currency purely in order to make a
profit from its changing value.
According
to the economist Bernard Lietaer, author of The Future of Money, as recently as 1975 roughly 80% of foreign exchange
transactions involved the real trading of a product or a service. The
remaining 20% were speculative; bets made on the value of currencies going up
or down – buy it before it rises, dump it before it drops. By the late 90s that
ratio had changed dramatically. In 1997
the percentage of foreign exchange which involved transactions in the real
economy was only 2.5%.
Today,
the picture is even starker. According to the Global Policy Forum, in 2011 only
0.6% of foreign exchange could be traced to genuine international trade in
goods and services. Of the rest, a minimum of 80% was directly attributable to
exchange rate speculation. The ratio of mud to brick has reversed entirely.
Let
me now give you an idea of the size of the wall. An estimated $5.3tn changes hands every day in the foreign exchange
markets. That is an entire year's worth of the European Union's GDP,
gambled every three days. More than 40% of these trades happen in the UK. On a
daily basis, the financial institutions of the City of London make speculative
currency trades worth nearly as much as the entire nation's GDP for a whole
year.
Some of the foreign exchange
sub-markets (like the $2tn spot market) are controlled by fewer than 100
individuals, working for a dozen large banks. Add into this mix the fact that regulatory
authorities last week launched investigations into at least 15 global banks for
alleged manipulation of these vast
markets and the need to reconsider and redesign this warped system becomes
even more urgent.
Five
thousand years ago, a shekel was a unit of weight – usually barley. I want some
eggs; I will give you these two standard bags of barley for them. Then someone
thought "wouldn't it be better to have something small and easy to carry
that just represented bags of barley?" And so, around 650BC, the Lydians created the first few coins. Money developed
explicitly as a tool to make our lives easier, our trades less onerous.
"Money,"
wrote Ayn Rand, "is a tool of exchange, which can't exist unless there are
goods produced and men able to produce them." This is no longer true.
Money itself has become the thing most traded. It is critical to understand the
size and nature of this behemoth industry in order to dispel the myth that as a
country (and globally) we are united in a process of restoring economic
stability. We are not. The money is made in predicting the peaks and troughs.
No peaks and troughs, no profit.
