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Here is the direct link to the 64-pages paper. This blog entry contains just an excerpt from it.

About

Last week Enno put me into his blogroll calling me a One-Man-Think-Tank. I found this so flattering and encouraging that I decided to make available more of the stuff that is lingering on my hard disk, but never seems to be final or good enough to publish it.

When in the last year the financial crisis reached Germany I felt as helpless and clueless like everyone else, and I was curious to find out what might happen as a result of this crisis. The mainstream media was obviously not of much help, and even the public experts were talking mostly bullshit. So I started to dig through the internet, read books and talk to bankers and people who studied economics. And in good enlightment tradition, I used my own mind. In the end, all this turned out to be a good combination to get all the answers I was looking for. And because I understand things better when I write about them, I wrote everything down.

This became a 64 pages long paper which is way too long for a blog article, but written in blog style. I would have published it long ago, but a hard disk crash set me back and I had to recover the paper by scanning and OCR-ing the only version that survived.

Today I read it again with some distance and found it interesting and good enough to share it with the world, so here it is. If you read and understand it you will probably know more about money, our financial system and the crisis than the average banker or MBA. I also had the idea to turn the paper into micro-site so you can easier get to the chapters you are interested in, but whether I will put in this effort will depend on the feedback I get.

The text is written for someone who has absolute no clue about economics, but should be also enlightening and fun for professionals.

Here is the Table of Content:

• Common Knowledge about Money
• Many Mysteries
• Types of Money
• Money
• How Money is not created
• A Quantum Physics Analogy
• Real Money Creation
• Destruction of Money
• The Path of Money
• Hierarchy of Banks and Money
• Why do Banks create money?
• Businesses
• Stocks and Balance Sheets
• Houses
• Consumers
• Gross Domestic Product
• Economics
• The Path of Debt
• Derivatives
• Collateralized Debt Obligations Illustrated
• Problems with CDOs
• Credit Default Swaps (CDS)
• Short Selling
• Hedge Funds
• Alpha and Beta
• Martingale
• Carry Trade
• Money Revisited
• Velocity of Money
• Time Value of Money
• Do-It-Yourself Credit Money
• Money Summarized
• Outlook
• Radical Alternative Economic Systems
• Doing Some Justice
• Towards a World Government?
• The World in 2050
• Final Remarks

I decided to put a few chapters of the paper directly (those marked bold in the above TOC) into the blog. These chapters do not go that much into the details, and are hopefully an entertaining read. But if you are a nerd and you really want to get a feeling for the way the financial world ticks, if you want to know what money is, how it is created and destroyed, how debt is traded, what derivatives, futures and short selling are, why "hedge funds" promise to deliver "alpha", and how investment bankers created and sold "Collateralized Debt Obligations" to Fireman’s Widows and Orphan funds and what the future will bring, you should read the whole paper.

If your time is limited and you just want some entertainment and quick enlightment, you can continue reading here.