Backup & Beyond (mostly beyond)

I just can’t resist posting this! I don’t know what to feel about the current economic crisis and how the US Federal Reserve and the central banks across the world are going about trying to avert a complete economic collapse – by pumping in more and more money into the system. I do not know if I am feeling depressed or agitated, or both! Here is a simplistic way of describing what the Fed is trying to do; you can judge for yourself if this is all true “free market”.

Let’s say there are 100 people in a room and that all of them are going after 10 goods that are being traded. Out of the 10 goods in the room, 2 are essential commodities and the remaining 8 are just luxury. The money that can be used to buy these goods is the Government/Federal Reserve mandated currency, which in the case of the US, is the US Dollar. For whatever reason, most of the 100 people decide not to buy the luxurious goods – for now!

Here’s what happens next…

At the prodding of Nobel Prize winning economists like Paul Krugman, the Fed (feel free to substitute this with your country’s equivalent – its the same everywhere) appears on the scene and decide to, at random, pick 10 people in the room. Actually its not so random but is based on some unarticulated criteria which, for the purpose of brevity, I will not go into. Suffice it to say that people like Bernard Madoff would surely be one of the “chosen 10″. The Fed decides to stuff the chosen 10 with truck-loads of cash (US dollar in this case) so that demand for the 10 goods can be created!

Now, the 10 people who got the ‘new money’ buy some of the goods using the new money and also lend some of the money to, perhaps, another 20 people in the room – so that they can also pitch in to create demand for those useless goods that nobody really needs. Again, let’s not go into the details of how these 20 people are chosen. Amongst these 20 people would be people like Jeffrey Skilling, Bernard Ebbers, Sanjay Kumar, etc. The Government also chooses a couple of people from the ‘most incompetent people amongst the 100′. These people are given the responsibility of monitoring the gang of 30 and helping make the whole charade appear legitimate. This way, everyone’s focus is on how effectively the gang of 30 is being monitored rather than how the gang of 30 got the new money in the first place. Its an old trick; magicians call it ‘misdirection’

Lets now play out what will happen to the 10 goods in question…

There is more money in the hands of the “chosen 30″ and they go and bid for the available goods and, in the process, they ensure that the prices of all these goods (unfortunately, including the essential goods) go up by an order of magnitude. Out of the 70 people ‘left out’ of the new money, many will work for the chosen 30 – producing more of the 10 goods. These ‘workers’ are satisfied with taking the crumbs left over by the ones with the ‘new money’.

However…

Since the prices for all the goods have gone up, most of the ‘ordinary 70′ can’t afford most things! Most of them would be satisfied with working hard for the crumbs. However, people being what they are, some amongst the ‘ordinary 70′ would compete to get into the first or second ‘chosen’ sets! Membership isn’t too difficult and can be obtained by sucking up to them (the chosen ones)- i.e. by directly eating from what’s drooling out of the mouths of the chosen 30 and cleaning their toilets in return – all so that they eventually can become part of the ‘chosen’ gang.

The “smartest” ones like Paul Krugman would become advisers to the chosen 30 and mathematically model the behavior of the 100 people so that they get to buy the goods without actually doing any work at all.

While the above may appear to be an over-simplification, I am absolutely certain that what the US Federal Reserve is doing is almost exactly what I have described!

The Politicians, the intellectuals at the Federal Reserve, the banking system, and the other ‘crooks’ everywhere – they all make us believe that this is “free market”. We also believe it because every one of us can choose to pledge our self respect and aspire to join the gang – provided we have the skills and the inclination to suck up. We also believe it because in the name of democracy we can also elect the crooks whose toilets we want to clean – and then aspire to be one of those crooks. Indeed, its a beautiful “free market” world we are all living in.

It’s left as an exercise to the reader to figure out what would really be a true free market. The clue here is to start with abolishing the Federal Reserve and abolishing the Government’s right to mandate what money people should use and, by extension, taking away from the Government the right to create money out of thin air.

Finally, if we, the ‘ordinary 70′ in the room do not wake up and stop the Federal Reserve from stepping in, there is no question that all of us collectively would eventually play into the hands of the Hitlers and the communists waiting in the next room. And by the way, the process has already started!

The above post was written by Sekar Vembu of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.