"Not everybody is happy living in a cultural wasteland," says Albert to Frank. "I don't want to be a part of it."
"Neither do I," says Frank, "but what options do we have to stay out of this wasteland? As you said, nobody likes riding horses anymore. Everybody wants to ride in fancy sports cars. Horse ranching used to make a good living."
"But the sports cars won't go where the horses go," says Albert. "People need horses. Horses are honest. If you treat them well, they'll treat you well in return. If you work hard for their welfare, they work hard for you likewise. They live by a bond that people have forgotten, that people no longer honor. Maybe that's what I like about working with horses. There is something about them that the accountants can't quantify. Maybe that's why girls like horses."
"If you don't want to sell, maybe you should open the ranch up to people who still honor the kind of quality that the horses have to offer," says Frank. "Maybe not all people have yet been swallowed up in the cultural wasteland that our world has become. Look for people that value what the accountants cannot measure."
"And where would I find them?" says Albert. "Where would I find those honest giants, who value what the accountants cannot see?"
"You might find them in the dark places in the cities, among the little folks like us, the working people," says Frank. "Maybe we should forge an alliance with them and invite them to come here. We should invite them to camp on the ranch, or even work on the ranch with the horses, and pay for the privilege. Maybe our trouble is that we have catered to the rich instead of to the giants. The rich are little people and cheap on top of it, some even skip out without paying."
"I'd sooner be one of the giants, and be among them, than be a millionaire, and be living among thieves in the beach resorts," says Albert. "Maybe I go home now and feed the horses." And that's what he did.
Albert feels good that evening. He feels happier about his lot in life as a horse rancher, than he had for some time. When he meets Frank again a few days later, as he does from time to time on his morning ride in the clear light of dawn, he tells Frank so and thanks him for having helped him to open his eyes."
"I spoke to Jason again," said Frank. "Jason had called me up and urged me not to follow up on his suggestion. He had thought about it, and concluded that it wouldn't work."
"Isn't that what I told you?" says Albert. "Nobody would pay a million dollars for anyone of our horses. Sure they are fine working horses, of a good stock, but they are not worth a million each. You were dreaming when you said we could get a million for each."
"No, no, Albert, this part would work," says Frank. "Everything that he had told me before, would work. This part works. This is done everyday. It's normal business."
"So what's the problem?" says Albert.
"The problem is that money isn't safe," said Frank. "It's here today, and gone tomorrow."
"Are you accusing me of being a gambler, so that I would gamble it all away, and be broke in no time?" says Albert. "I am more inclined to be frugal, and be miserly. I would buy a little cottage somewhere near the beach, and ride a bicycle to get there."
"Your money still wouldn't be safe, because nobody's money is," says Frank. "Jason just realized that. "Sometime ago they invented a new method for making money that is so insane that it will wreck everything. With this new method you can become a billionaire without even owning a horse to sell. You buy derivatives contracts."
"You are speaking in riddles," says Albert. "How would this make money? And how would making money wreck everything?"
"Jason owns a public company, right?" says Frank. "This means that his shareholders own the company, and the shares are traded. Who offers the highest price gets to own the shares. When the price is right there are always buyers and sellers in the market. But it's risky. Often people buy the shares with borrowed money, and when things get tight they have to sell. In order to attract buyers, they lower the price. When a lot of people do this, the effective value of the entire stock of that company is thereby reduced. People loose money. Fund managers, who run a tight ship, can't afford to be that vulnerable. They need to buy insurance against that. So they go to a bank or a financial insurance company and buy a risk protection contract. These contracts are called derivatives. Now, when the value of the stock goes down, as people undercut each other, the insurance will make up the loss. In this case, the bank or the insurer looses out. Now some people have said to themselves, why do we need to own any shares at all, to profit from this process? When our research tells us that the market is going to go down, why can't we buy the insurance contracts anyway, and take the pay-out as profit if our hunch turns out to be correct and the market drops? The banks smile at this and say, sure you can do this. We will sell you as many of these contracts as you wish to have, or as many as you can afford to pay the insurance premium for. The banks are happy with that. They adjust the rates according to market conditions, and adjust them highly in their favor. Since the banks are controlling the game, they tend to make huge profits from it, and being greedy they now sell insurance contracts for any financial variable you can name. The investors now can buy betting contracts on oil indexes, gold price, bond yields, the price of pork bellies, soy beans, international currencies, stock market indexes, anything you can imagine, and nobody has to own the actual real thing that these bets are related to. The money that can be made that way is virtually unlimited. And that is why it doesn't work, said Jason."
"You lost me," says Albert. "Why wouldn't it work?"
"Why didn't landed feudalism work for long?" says Frank. "It stopped, because there wasn't enough land in the world to satisfy the greedy. That is why gold as a currency doesn't work, because there is not enough gold in the world to meet the requirement of an expanding economy. That is also why the stock market couldn't be driven past a certain limit, because the stock market has a physical component that puts a damper on the greedy, especially when their greed keeps on wrecking the industries, which is thereby reducing the physical component. They had to find a way to disassociate the money making from any physically limiting factor. So they came up with the derivatives game. This is a game that has not a single physical component in it that would limit the expansion of money making. The game is derived from the physical values, but goes far beyond it."
"And that is where the danger lies," says Albert. "The danger is obvious, isn't it? Even I can see this."
"Guess how big this game is?" says Frank.
"Oh, I can imagine it being big," says Albert. "Our economy in the USA produces roughly 12 trillion dollars worth in economic product every year. That includes everything, every car that is made, every service that is provided, every bean that is grown in the fields, every horse that is raised, and every house that is being build. Our stock market is probably trading shares in the range of thirty trillion, and if you are right and they pulled limits out of that, the derivatives market is probably a couple hundred trillion dollars big, soon to exceed the quadrillion mark, as you said yourself. Yes, that is where the danger lies. I'm not that stupid, not to realize that when a major shift in the physical world will turn the derivatives bubble into a giant liability, that is by then so big that it dwarves all the currencies in the world into insignificance. This means that every bank around the world is already technically bankrupt."
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