Post-Apocalyptic Human Farming and Central banks

You remember those squid robots from the Matrix? You know, the ones that farmed human beings as batteries cause they had never heard of…

You remember those squid robots from the Matrix?
You know, the ones that farmed human beings as batteries cause they had never heard of the solar revolution? #climatecrisis
Well guess what? You’re one of those dumbass cephalopods.

Now, if you’re too young to know the Matrix then congratulations… you’ve made me feel old and out of touch. Imagine you’re Ricks car battery in Rick and Morty, I don’t know.

As a robot farmer, you tend to your small crop of people pods, draining electricity out of each victim. Being a greedy squid, you would like to take 100% of the lifeforce from the pods… but then all the people would die, so you’ll need to keep some power in reserve.

With your big mechanical brain, you figure out that it only takes 5% of the electricity to keep the people alive, so you consume 95% and go on your merry way, doing robot squid stuff.

Good job you octo-idiot, you played yourself. Some Keanu Reeves-looking loser has gotten woke and now there’s not enough power left in the system to keep all the people alive. You screwed up your crop and in the post-apocalypse the government doesn’t handout farming subsidies.

Even with your calculations, you can’t predict crazy outliers, so you have to keep more in reserve to be safe. You decide to only use a conservative 50% of the power. All the other squid-bots are zipping around on 95% power and you’re moving around like a Roomba with tentacles.

Big daddy Kraken-bot, the king of the machines, sees how inefficient the system is and comes up with a solution.

Any crop farm-bots that are in desperate need of electricity can borrow it off Kraken-bot for a fee. That way they can use all their power without worrying about one or two people waking up.

But now there is a new problem. Everyone goes back to full power and just borrows all the power they need. They don’t even care if Neo wanders off because the Kraken-Bot can keep them topped up. Kraken-bot is pissed. It wanted to help but it isn’t going to keep all of its power in reserve just cause these bionic calamari are getting greedy.

It makes one more rule. Every squid-droid must keep 10% of its power in reserve. If they need more, they can borrow it, but only after they use their own 10%.

All your fellow robots run at 90% and no one has to risk a power failure. Now you can squash those dissident apes and end the human rebellion! You know what that means!? No Matrix 3!

This is how fractional reserve banking works.

The mindless humans in bubbles are everyday citizens like you and me.

The electricity is the money that we put in a bank.

The Kraken-bot is the Central Bank.

The amoral, spineless automatons, sucking the very life force of their victims is… apt.

Retail banks make a lot of their money by giving out loans, credit card debt and investing. They want you to keep your money with them so they can use it for even more loans and make even more money.

It’s just that they don’t like giving it back.

“But I might need it”, I hear you shout at the screen. Just kidding, I can’t hear anything. Please stop shouting at your screen, it’s weird.

Yes, you might need your savings, but you rarely need it all at once and even if you did, not everyone needs all their money at once.

So banks keep a fraction of their money in reserve, in case you come asking for it. This is usually around 10%.

But what if people take out more than 10% of their savings? What if Boost Juice create a drink that isn’t 99% ice and people can’t get enough of it, causing a stampede to get to an ATM? In the past, this would be called a bank run. The bank would run out of cash and people would be as screwed as a giant matrix squid robot running out of power… I need to come up with better analogies.

Nowadays the Central bank can lend the retail bank the extra money to cover the difference… for a fee. Bank runs can’t happen, cause big daddy can always cover the check and bankers can afford to take risks.

Banks want to make as much money as possible so they constantly try to predict how much money people will need so as to keep as little in reserve as possible.

Because of this, central banks often enforce what are known as reserve requirements: A fixed percentage that banks must hold and not spend.

By increasing or decreasing this reserve requirement, they theoretically increase or decrease the amount of money available in the economy. We’ll talk about this later. Don’t worry your pretty little head about it.

Fractional reserve banking is incredibly important to the financial system and it has revolutionised the way countries do banking. Or should I say Matrix: Revolution…ised.

No. Just pretend that movie didn’t happen.

By Lachlan Holt

Note: In Australia, there is no set reserve requirements. Instead there are capital requirements. For your average person, the analogy for reserve requirements is good enough to get an understanding of the system. We may talk about capital requirements later.