Bear with me while I ramble about an analogy that may take at least 2,000 words to explain. This is a world I’ve been exploring for the past three months, and I’ve been having fun learning about it thus far. Coming into the game this late, I believe I’ve been seeing it in a unique light, different from how most people see it. Money — the thing which makes our world go round — is much like the forces that govern fantasy worlds. Many seek its power, but few harness it.
I wanted to title this post as “My Little Ponzi: Finance is Magic”, which I still think is really funny, but I chose the current headline to hammer home the premise. We have mages and sorcerers in this world, but instead of robes and pointy hats, they instead wear suits and ties. Then again, with the democratization of finance through smartphones and the Internet, people usually make money moves in their pajamas and bathrobes these days, so we’re back to flowing garments.
Most see finance as a path to garnering great wealth in a short time, like how magic can make a weakling powerful in a snap. But even if you manage to accomplish the improbable, holding onto that power for long without consequence is impossible. The devil always gets his due.
DISCLAIMER: This blog post is based on my current economic and financial understanding as of the date of publishing. I’m still learning more about this stuff, so I may stand corrected on things I’ve written here, which I may or may not correct with future edits. You may leave corrections, suggestions, and vitriolic insults in the comments section. Thank you.
What Do I Mean by ‘Finance is Magic’?
When I say “finance is magic,” I mean it as sorcery of the real world. I mean it as the act of peering into the void, mocking the gods, summoning monsters and spirits, and making deals with the devil. If all that wand-waving stuff is what pervades in Harry Potter’s world, financial witchcraft is what rules ours with capitalism and the fractional reserve banking system. They have Hogwarts, we have Wall Street. That magic is fiction, money is our reality.
Aleister Crowley found magic in sex, occultism, and narcotics. The only thing that kept him from truly becoming “the wickedest man in the world” was that he didn’t have billions and held no sway over thousands of employees. John D. Rockefeller was a sorcerer more supreme than Crowley could ever be because Rockefeller’s magic affected the lives of the whole populations and succeeding generations. Ordo Templi Orientis does not have the same pervading legacy as Standard Oil.
Perhaps some may find this analogy to be a hamfisted one, and I agree with that notion. However, with how universal the power and necessity of money is in everyone’s lives, I can see the parallels between money in the real world and magic in fantasy. I’m still playing a lot of Elden Ring as of this writing, so it’s making a lot of sense to me right now.
Let’s explore this idea of finance being magic in the real world, pervading and all-encompassing yet seemingly esoteric and obscure to most people. However, with deep and careful study, it’s possible to learn these things and become a financial wizard in your own way, even without an accounting degree or MBA. Economics is like physics, and finance is the application of knowledge in those physical laws. However, instead of it being an exact science, much of it is dictated by the ebb and flow of the most chaotic of natural forces — human behavior.
Money is our mana, income streams are spells, and financial instruments are enchantments. I’m not sure yet how well that analogy works, but I hope you get the idea.
Different Branches of Finance as Different Schools of Magic
Welcome to the rambling portion of this blog post. This is where I put most of the ridiculous and nonsensical stuff, but I think it’s also where the most interesting ideas are. This is also why this blog post took weeks to finish because I was trying to research things I’ve only started to learn about and shoehorn them into fictional elements in a hamfisted analogy that won’t make sense to most people, especially those who don’t consume fantasy media.
Let’s start with something normal and safe. You put your money in the bank for safekeeping, which the bank then uses to lend to loaners who use it for purchasing homes and cars, fund businesses, pay medical bills, and so on. You then earn a cut of the interest from those loans. That’s basically how the modern banking system works, and it sounds simple enough.
Abjuration magic deals in protective spells for the caster and their party, as well as spells that suppress enemy magic. It’s like how banks protect your money from physical damage and loss, as well as lend it to others while earning interest when they pay it back. However, you can also say it’s a debuff these days due to how far down the global economy has gone.
Things have changed for the worse since the 2008 recession, and even way before that. You put your money in a savings account, it’s supposed to grow like how you were told as a child (if you have financially responsible parents), but interest rates are so dismal these days that you might as well put that money under your bed since banks have been failing lately.
You can put it in a time deposit, and that can get you more each maturity period, especially if you happen to have your money in dollars and you live in a country with a lower standard of living (ask me how I know). However, with record-high inflation rates in recent years, your money in time deposit is still depreciating — it’s just rotting a bit slower.
Alchemy: Fractional Reserve Banking
For those who have watched Full Metal Alchemist, you may be able to follow this idea. The fractional reserve banking system that our fiat currency is based on is this era’s version of alchemy. It’s a complicated form of equivalent exchange, where the equation is not actually balanced and could give Edward Elric an aneurysm.
I first learned of the fractional reserve system from Zeitgeist: Addendum, the last film of a trilogy by Peter Joseph. It was a favorite among conspiracy nuts while it was still somewhat fun before social media ruined everything and made conspiracies unfun with boomers ranting about vaccines causing autism and the Earth being flat on Facebook.
When $1,000 enters the system, $9,000 is created on top of that. That totals $10,000 that enters the system, with the 10% that originally entered the system being held in reserve while the other 90% is excess that can then be used for loans.
When someone deposits $1,000 in the bank, 10% of it ($100) is held as cash reserve by the bank and the other 90% ($900) is loaned out. That loan is also entered, thus there is now $1,900 in the system. The 10% ($90) of that $900 that was just entered is then held in reserve by the bank and the other 90% ($810) is then loaned out.
This cycle repeats, thus generating new money in the system. The loans that generate that new money is then paid back with interest, a small fraction of which is paid to account holders. That’s the basic gist of fractional reserve banking, and you can say that debt is the fuel of that engine and interest is its catalyst.
Perhaps we can transition to a full reserve banking system, but that’s a topic for another time.
Black Magic: Trading Equities
Trading is black magic. That’s where the real mystery comes in. To outsiders, it’s witchcraft. When you explain to them the difference between a stock and a commodity is, their eyes may glaze over and they may faint right then and there. If you happen to have a family who views it in the same light as gambling, you might as well be burned at the stake.
When I say “black magic,” I mean the esoteric stuff that’s akin to the occult and the forbidden. My mother discourages me from getting into stocks because she equates it to gambling. While people who know better would say differently, to someone like her whose past was allegedly marred by her former husband’s gambling addiction (not my father), she has trauma against anything that has even a little bit of financial risk.
Stocks is what most people think of when it comes to equities, and that’s still the foundation even in a world full of more and more sophisticated financial instruments. You can invest your money in a company, hoping that it grows and more people invest more money in it, which makes the stock price go up. The concept of leasing services to companies has existed since Ancient Rome, and buying shares of a company has been around since the 13th century.
Stock trading is ancient magic, and those who delve in it stand on the shoulders of giants.
ETFs are alchemical products with different reagents mixed together that turn lead and other trash metals into gold. You have regular ETFs that combine different holdings together as one, leveraged ETFs that produce double or triple of regular ETFs via leverage, and inverse ETFs that short those holdings so money can be earned during bear markets. You can trade ETFs for quick gains during key moments or invest in them to grow your money over time.
Trading futures is like being a guild navigator in the Dune universe, looking into what happens next in the next few minutes to an hour right then and there. I dabbled in it for two weeks, and I lost a good chunk of my gains. Unfortunately, no matter what indicators I use on my TradingView, there’s no way to truly predict the future accurately, whether I’m trading crude oil, gold, silver, palladium, aluminum, wheat, or livestock.
But if you’re really looking for clairvoyance, then perhaps you can get into options. I’ve been learning about trading options lately, and I’ve been doing my best to learn about buying and selling calls and puts, setting strike prices, and understanding each of the Greeks. It makes more out of stocks and is the next logical step to retail stocks. It can help you both buy stocks for cheaper and get more out of the stocks you own.
Foreign exchange, or forex, is transfiguration, one that I will never touch even with guidance. There’s something about forex that makes me antsy as hell. Even if there’s one hell of an arbitrage opportunity in exchanging one currency for another, I don’t feel comfortable about turning US Dollars into something else as things stand.
But then there’s the pariah of our generation, which is cryptocurrency. Delving into it is like staring into the abyss. And now in 2023, it certainly stares back at us. I’ve known of Bitcoin since 2010, and I’m half-regretful and half-relieved that I didn’t take the opportunity to buy a couple of Bitcoin back in early 2015 when I had the chance simply because I didn’t know how to deal with wallets and exchanges, but that’s just how the stone rolls down the hill.
Since having had more experience with trading crypto at this point, I can say that while I still see futures as more perilous, the thing that makes crypto a lot more of a handful to deal with is the market being open 24/7. Since humans aren’t supposed to be up 24/7, things can go bump in the night with big moves and corrections during unholy hours.
You can wake up having your investment either going way up or way down, and I don’t know if that kind of excitement is good for my blood pressure.
Astrology: Reading Charts and Indicators
On the subject of equities trading, becoming a stock trader or investor means you’ll have to learn how to read those charts with the squiggly lines and colorful bars. Trying to predict the future of a stock by reading charts, looking for patterns and using more squiggly lines to make sense of squiggly lines, is akin to astrology.
It’d be great if you have the power of Biff Tannen with his sports almanac that has results of every future sports event, but going to TradingView.com and adding three SuperTrend indicators made by KivancOzbilgic, a moving average indicator set at 200 and an exponential moving average indicator set at 50 to see when and where the lines cross to know the precise moment a stock is about to shift is not going to make you a millionaire in just a couple of trades.
And even without all that stuff, you can just look at the candlesticks and see patterns like how Charlie Day in It’s Always Sunny in Philadelphia sees conspiracies. Stock charts really are like the star charts of the financial world, and those patterns are like the Zodiac. If you happen to have an ex who was really into horoscopes or Myers-Briggs personality types, you know it can be as annoying as mosquitos at night.
People who are into these chart patterns are attempting to predict human behavior with squiggly lines. The conundrum with trading is that once a strategy, tool, or pattern starts getting used by everyone, it stops working. That’s why trading-related content on the Internet tends to be mostly about the basics and reiteration of basics. Whenever you see a TikTok of what stocks to buy or whatever movement in the market is the alert for something big, it’s already too late.
Never take trading advice from either online hype or supposed patterns in squiggly lines.
Illusion: Accounting and Tax Fraud
I’ll use this example because I’m quite familiar with this story. I watched the documentary about the corporation hundreds of times at this point, and I still rewatch it every now and then.
The now-defunct accounting firm Arthur Andersen did just this for the infamous Enron Corporation. They did mark-to-market (MTM) accounting, also known as fair market accounting. This form of accounting allows for the booking for potential future profits on the very day a deal gets signed, no matter how little cash actually comes in.
For instance, your company just signed a lucrative business deal with another company that’s worth $50 million. Of course, you haven’t earned that $50 million yet, but you can put that money into your books with mark-to-market accounting to look really good to the outside world, boost your company’s value, and pump the stock all the way to the moon.
In the case of Enron, the CEO Jeffrey Skilling implored for MTM to be used in order to make tons of money in spite of reality. MTM accounting itself isn’t that controversial at that time as long as the potential profits become actual profits, which is why both Arthur Andersen and the Securities and Exchange Commission both signed off on it for Enron. However, the way Enron utilized it was incredibly subjective and very open to manipulation.
Jeffrey Skilling dubbed this form of MTM accounting as hypothetical future value (HFV) accounting, which was meant to “add a kazillion dollars to the bottom line.” It’s not bad if that hypothetical future value actually materializes. However, Enron wasn’t actually making that money from its deals, thus its high valuation and stock price ended up being fabrications perpetuated by MTM accounting.
Enron had a deal with Blockbuster to do video-on-demand in the early 2000s, during the age of DSL internet. Perhaps that’s why they infamously laughed Netflix out of the room a bit later.
When Enron imploded, the company closed down, its executives went to jail, and the accounting firm responsible for the grand illusion — Arthur Andersen, the oldest of the “Big Five” — died with it.
On a tangent, the consulting wing of Arthur Andersen would break off before the firm’s closure to become Accenture. Filipinos should be quite familiar with that name.
But that’s not all. Enron was also into hiding their real financials in shell companies, which is another kind of financial illusion magic that is still being done today. Andy Fastow, the chief financial officer of Enron, created shell companies that let him hide the company’s losses and make deals with himself.
The same thing can be done to hide your money from the taxman, especially if your shell company is based in a tax haven like the Seychelles, the Bahamas, Hong Kong, or so on. Remember that tax avoidance is not necessarily illegal, but tax evasion definitely is. If you have to pay it, you can’t not pay it. But if you don’t have to pay it, you can not pay it. Get it?
Summoning: Hiring Accountants and Lawyers
Speaking of bookkeeping, this is perhaps the most powerful way rich people weaponize their wealth. This is why in the Philippines, the college degrees that get the most buzz are law and criminology — people want to either pass the bar and become a lawyer or join the police force.
If you can’t do either of those, you either join the Bureau of Customs or work in a call center.
Perhaps you may ask, “What’s so magical about hiring goons to do your dirty work for you?” The answer to that question is that the act of using your resources to employ force multipliers to not just accomplish tasks, but do so without exerting more effort yourself, is in itself an act of magic. If you’re still with me here, then you know how deeply that kind of power can corrupt.
You grow and replenish your mana, then make it work for you tenfold, hundredfold, or even thousandfold by summoning a horde. You sit atop your ivory tower and watch them despair.
Occult Studies: Becoming an Accountant, Lawyer, or Financial Analyst
This is where I start tasting my own ass with how close my head is getting to being shoved into my rectum with this analogy.
Mathematics is the language of the universe. It’s how you understand how celestial bodies move, how bridges close gaps, and how money moves. While a lot of these roles don’t need you to be a mathematician to excel, learning math, accounting, and statistics, and so on can help you decipher what seems incomprehensible to most.
If astrophysicists can find black holes and dark energy with it, you can certainly see how money flows when you learn the language of the universe, which is math. You can recognize Ponzis when others only see stable gains, like Harry Markopolos did nine years before Bernie Madoff’s Ponzi scheme collapsed under its own weight.
Explain math to your kids like that and maybe you’ll be able to actually justify why you pay their tuition fees in the first place.
I thought I’d only need 2,000 words, but ended up with just under 3,500 words in this manic rant of a post. I’ll end this now while I’m ahead.
I’ve had this draft in my Google Docs for weeks, which I really have to stop doing since I really need to push more content out on a regular basis. The idea seemed good at first, but it started buckling under its own weight as soon as I realized that I didn’t know much about occult magic like I did around 20 years ago when I was still into researching that stuff.
Perhaps as I learn more about financial stuff, I’ll be able to either refine this idea or completely dump it as I may realize the error of my thinking. In the meantime, unless something really insane happens, the US Dollar stops being the reserve currency of the world, and cryptocurrency finally wins against fiat currency in being legal tender globally.
Have something to say? Do you agree or am I off-base? Did I miss a crucial detail or get something wrong? Please leave whatever reactions, questions, or suggestions you may have in the comment section below.
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