Okay, we all know what happened in 2008. On the surface most spin doctors blamed the insatiable banks for loaning money to people that they absolutely knew will not be able to repay them. If we dig deeper and look for a more "root" cause, we will find that the low, low interests that central banks held for many years created the situation because they unleashed oodles of "easy money". And when there is a lot of money the law of supply and demand kicks in. Therefore, the price of money (i.e. interest), dropped like a stone. In those conditions and in order to maintain profitability banks went out and loaned anything to anybody that could fog a mirror.
If we dig even further in the chain of events, we will find that the culprit is actually the marketization of those mortgages. The idea that mortgages can be sliced and diced like sausages and repackaged in neat tidy boxes for general consumption with complete disregard for risk is ludicrous. Yet, this was explained to investors because those mortgages were "selected" by hand. What this meant is that mortgage packages were supposed to contain only "good" mortgages belonging to people who could afford to pay. Furthermore, this was supported by a vast array of statistics demonstrating it through the convenient and ubiquitous use of FMV.
What is the FMV you ask?
FMV stands for Fair Market Value. And what is this FMV that we speak of? The Fair Market Value it's supposed to represent the price that the good or service would fetch in a free market should it be sold.
This is all good and hunky-dory for as long as a market for said good or service actually exists. However, for all those exotic investments and their derivatives, there was no Fair Market Value. The FMV was nothing more than a calculation performed by "quants" (that would be quantitative traders) in a computer. The FMV was actually nothing more than a figment of their imagination.
No market? No problem! Was their motto.
In a true free market, the FMV does not exist. Either there is a price at which a good or service can be sold or there isn't. If there isn't, the exact value of good or service is exactly ZERO. By maintaining this fiction banks were allowed to continue borrowing well beyond their capitalization. What this means is that the banks kept borrowing money well beyond their collateral.
And don't kid yourself; governments were complicit in this scheme. Governments knew but they didn't give a rats ass about this because the going was too good. Alas, eventually, the manure hit the fan. And we all know what happened next.
The moral of the story is that 2008 would have never existed without FMV!
And what has this to do with anything? Well, everything!
It so happens that the FMV it's alive and well in bureaucratic thinking all over the world. Don't believe us? How do you think that your property taxes are being "assessed"? What do you think that your tax organization is using to guess how much tax money you managed to hide?
The FMV is yet another weapon in the arsenal of bullshit that governments unleash against us. The FMV it's a figment of the imagination which is extremely useful when it comes time to rob you. Why is it so? Because the FMV it's meaningless and it has no roots in reality. Therefore its value could be anything that any apparatchnik may pull from where the sun never shines.
Furthermore, the FMV it's extremely useful when the time comes for government "accounting" or, as we prefer to call it, creative fairy tailing.
Don't believe us? Just ask any accountant if he could do your accounting using the same rules that the government uses. Even better, don't bother to ask. We will tell you their invariable reply: NO! And why not? Because if you would be so stupid as to use the same rules, you would probably end up in prison for… wait for it… tax evasion!
That's right, ladies and gentlemen, the MFV allows for the unrestrained application of the very old saying "do as I say, not as I do".
Why is that government bonds for example must be taken at face value? Because remember, the government it's always printing money and therefore the concept of "face value" it's utterly meaningless. What matters is the amount of wealth that those bonds will pay and this wealth has absolutely nothing to do with their "face value". This fantasy can be maintained simply because the government can force anybody and anything to accept the FMV.
Yet, interestingly enough, we, the people, are not allowed to use the same trick. Don't believe us? Just try to declare what you believe the FMV of your house is in order to lower your taxes. Or, try to pay what you believe the FMV of government goods and services are. Or, try to demand from your government the FMV of the goods and services that you pay for through your taxes but you never received because your government spent it in something completely different.
Then, and only then, you will come to realize that strangely enough the FMV doesn't work both ways. It only works against you but never, ever, in your favor.
This is another reason why we believe in free markets. Because in free markets none of this bullshit can't take place. This is so simply because the free market (this is, all the people) will not accept it. Do you believe that anybody in their right mind would pay for your good or service a price you believe it is worth? Not a chance! The price is always determined by a process of discovery though which a point is reached whereby a mutually agreeable exchange of wealth is accepted. In a free market unilateral pricing simply does not exist!
Do you realize now the incredible policing power that the free market has? Even better, there is no government or central "authority" that needs to impose it. It imposes itself through the best interest of all market participants.
It is for this reason (as well as many others) that we are firmly convinced in the superfluousness of governments. We don't need them anymore and the sooner we get rid of them the better we will be.
The FMV it just another example of a Ponzi scheme. The governments who benefit the most are the early adopters. The ones that came after that not so much because by then people have already been scammed.
Hell! Not even the USSR impose an equivalent of an FMV… and they had all the power in their hands!
Yes, only in a democracy!
The FMV is there, it exists, and it is being applied every minute of every hour of every day of your life. What's more important is that it's being applied against you not in your favor. The FMV represents the typical attitude that governments have against their so-called "citizens". Basically, the FMV it's a synonym for F-U, if you get our drift. Although, we must acknowledge, it is nicely wrapped in a thick layer of political correctness and sprayed with a lot of pseudo-morality in order to cover its stench.
But this is us. You on the other hand, may enjoy the smell of rotten manure while you're being robbed. Hey! Who knows, who are we to say that you shouldn't enjoy your pleasures. If you enjoy this stuff go ahead and enjoy it without any guilt. Just one thing, when you're up to your shoulders in it don't ask us for a lifesaver. Remember, lifesavers do not float on s*it.
Note: please see the Glossary if you are unfamiliar with certain words.