If you go to a bank and borrow money to put into your business, the bank doesn’t give you a seabag full of greenbacks. It hands you a check, or it makes an entry in your account that claims it has given you money. It’s not real money, it doesn’t exist. It’s just as phony as if it had been run off by a printing press in the bank’s basement. But that phony money can be spent on buying materials, paying workers, upgrading physical plant, even paying off other debt. That money can create wealth that didn’t exist, but that wealth comes from human labor, not from the phony money that made that labor possible. That phony money, like all phony money, can also create inflation: too much money chasing too few goods.

This is not merely an abstract distinction, it’s the key to understanding the underlying physics in economics. The source of all wealth is human labor, a fact those who never actually work prefer to forget. Banks routinely have more money loaned out than they ever had physically in their possession, you know that. And all they have to show for it is a safe full of IOUs. All this phony money also sets up a condition where the economy must be in a constant state of growth, to ensure that debt can be paid off in the future. And when that future arrives, there will still be more debt. An economy addicted to growth is inherently unstable. What we think of as a “healthy rate of growth” is actually a treadmill to Hell. Nothing in nature can grow exponentially forever, that is the road to morbid obesity. I know those last two sentences are heresy to capitalists; they are parasites that prosper most on a grotesquely fat host.

In return for that money the bank loans you, you provide it with a promise that you will repay that loan, with interest. This isn’t money, it’s a promissory note, an IOU. It’s not real money either, but it’s negotiable; the bank can sell it or even rent it to other banks, or they can use it as collateral to borrow money from other banks. An entire “financial industry” exists based on this commercial paper, as we learned to our chagrin in 2007. This money is not based on human labor, the administrative costs of managing all this phoney money don’t count as value-adding labor, they are just overhead, paper shuffling. The banker or investor does no work or performs no wealth-creating labor, they are unproductive middlemen administering an imaginary commodity. They are parasites.

Of course, most businessmen DO legitimately work. They plan, they make decisions, they give orders, they hire and fire, they manage, they risk their reputation (no one goes to debtor’s prison any more). They earn their money fair and square, they do important work (maybe the most important) and they deserve to be paid and paid well. Their labor goes directly into producing and marketing the goods and services they sell, just as does that of the skilled machinist or lowly janitor on the shop floor, so they add to the real value of their product. No one denies that, and only a fool or an ideologue would accuse anyone of denying that.

But the financial types, those who deal only with money, who don’t even much know or care where or what the money they invest goes or does, are parasites, They get rich by controlling an imaginary commodity totally separated from reality, something that doesn’t exist. These are not businessmen or even merchants. They are vampires, and for as long as there has been capitalism on this planet these gamesters have led us into one Bust, Bubble, Panic or Depression after another. They not businessmen, they have nothing but contempt for real businessmen, who they dismiss as mere small-town carpet salesmen. To borrow money and take a risk and then bust your ass to make and sell a product against stiff competition…that’s only for chumps who don’t know any better. Real capitalists don’t work. Real capitalists don’t even invest their own money, they gamble with the life savings and pension funds or homes of people who do work or own businesses. And they are on salary, win or lose, they get paid; except if they win they get a bigger bonus, usually taxed at a lower rate. For capitalists, small businessmen are no different and little better than employees: chumps.

So what should we do, ban credit altogether? Of course not. Credit can perform a useful function, if used in moderation and with strict regulation. It allows us to build productive capacity using the virtual profits of that capacity borrowed from the future. It is a bootstrap mechanism, a time machine. But it can also be abused. And abusing it, as we have learned, can be very profitable. This is why there is a Republican Party. These are people who want a monopoly on deficit spending. They don’t want the government cutting into their lucrative little scam. They want to control and abuse all debt, after all, there is no debtor’s prison any more, is there?

As for all you righteous defenders of unrestricted laissez faire capitalism on this board, you are really a pathetic lot. You are not financiers, who really have a dog in this fight. You are not even legit businessmen. You’re businessman wannabees, has-beens or never-weres. Some of you don’t even have a fucking job. Get a life.