Ludwig von Mises spoke about the fact that knowledge of economics is a kind of civic duty of modern man. On all sides we are surrounded by phenomena that are the subject matter of this science. However, it is not “studied” in school. Therefore, the perceptions of most people about what is happening are based on a kind of “common-sense obviousness,” the same one that tells us that the Earth is flat. What’s worse, most mainstream economists are in solidarity with such “common-sense obviousness,” but this is already a somewhat different topic.
As usual, in schemes of this kind we are dealing with a half-truth. Mavrodi says that the “masters” print money and that’s why they live so well. Indeed, on YouTube you will find thousands of videos exposing the Fed and asserting that it (and any other central bank) “just prints money.” This statement in itself is true. But only a few of these videos contain adequate explanations of what “printing money” actually means in practice, how exactly this happens, and what real consequences it leads to. Most, however, due to prevailing economic ignorance, are satisfied with strange and completely inadequate conclusions drawn from correct premises. A characteristic example of such inadequacy is the widespread accusation of the Fed that it (horror!) is a private enterprise, as if the legal form of ownership mattered for a monopoly, any attempts at competition with which are strictly persecuted by the state.
The lack of elementary knowledge does not allow one to see a simple thing — Mavrodi deceives from the very beginning, already in his creed. Yes, modern money is a pyramid. But what does Mavrodi offer? He writes: “Pyramids produce money. And this is allowed only to the Masters. This is their sacred and inalienable prerogative and their unquestioned monopoly. The right to produce money is what makes them Masters. And here they are produced by… slaves!!!” But this is not true. Mavrodi does not give any chance to the “slaves,” no money is produced by slaves in his pyramid. He simply creates his little pyramid inside the “masters’” pyramid. The “masters” still rule the roost, the money that Mavrodi uses is their money, they regulate the money supply, set interest rates, conduct devaluations and “managed inflations.”
Mavrodi’s actions would correspond to his statements if he tried to organize a new monetary system, a new pyramid, with his own central bank, monetary unit, and fractional reserve banking. And I would very much like to see how quickly and exactly how this would end for him. As it is, what he does amounts to mere trifles, not particularly threatening to anything or anyone, except for gullible depositors. Purely theoretically, Mavrodi can “crash” the banking system, since MMM’s interest rates are higher than bank rates, which creates demand for bank loans and, in the event of their mass non-repayment during the pyramid’s collapse, can provoke a banking crisis. However, I repeat, this is a purely theoretical threat, for its realization it is necessary that an awful lot of people be in the system. And essentially, this does not change anything for the “masters,” they retain all the tools of control, up to “canceling” the discredited monetary unit and launching a new one on the same basis.
Indeed, government finances are a pyramid. However, it is structured much more complexly than Mavrodi’s primitive money pyramid, and not just monetary units move through it, but material and intangible goods. On average, every 10 years or so (more frequently since the 1970s) a crisis of government pyramids of varying degrees of globality occurs in one form or another. However, unlike Mavrodi’s pyramid, the state can print as much money as it wants and it never runs out of clients. Moreover, participation in the government pyramid is mandatory, and evasion is punished by law. Therefore, Mavrodi has no chance of competition.