Economics for Dummies #4: Time Travellers
Why do we repeatedly see banking induced financial crisis? In poorer countries, and countries where a small group has inordinate control, one can see that the political top bosses force bankers to lend to their cronies, regardless of the viability of the loan. But banking induced financial crisis are a phenomenon of the West too. What exactly is the problem with banking? Yanis Varoufakis answers the question in Talking to My Daughter About the Economy . It is all rooted in something we discussed in an earlier blog in the series – the need for debt (loans). Quick recap: One needs money now to build a factory, to pay for raw materials and employee salaries on a continual basis, in order to make a profit in the future . So how does one get that money now ? By taking a loan. From the banker, of course. Put differently and vividly, Varoufakis says one can almost think of the entrepreneur as a “time traveller” –He goes into the future and gets money for his needs in th...