The old Soviet Union, as a country consciously founded on an economic principle, spent much time and effort on drilling the basics of communism as part of its formal education system. 

To little useful effect, of course.  Education systems are singularly hopeless at achieving their ostensible objectives.  My generation was taught Latin ‘to exercise the muscles of the brain'.  Sadly, human physiology wasn't part of the curriculum so we never learned that the brain has no muscles to exercise.  And Thai children suffer such a bombardment of formal moral proselytizing that it's hard to know how anyone in this society could ever dream of vote-buying, driving as if you own the bloody road, or making extremely loud noises at extremely inconvenient times.

But capitalist countries don't include in their education system any explanation of how the capitalism works. 

Everyone is taught how to take part in the capitalist economy, of course.  Far, far more money is spent by the advertising industry on training us to be good consumers than is spent by the Ministry of Education on teaching us to be good citizens 

Now the apocryphal capitalist's complaint is that half their advertising budget is wasted, but there is no way of knowing which half.  But whichever half isn't being wasted actually does work, and remarkably well.  A recent refugee from a UK Christmas wondered how people can become so skilled at buying each other such huge amounts of stuff that no one actually needs.

So you're sitting there, thinking yourself a fairly well-informed person (you are reading Prachatai, after all).  Do you know how capitalism is supposed to work?

Bet you don't.

And you would be in very good company.  The late George Ball was an outstanding servant of the American Foreign Service, partly because he kept getting right things others got wrong.  In 1961, for example, he warned President Kennedy that if they upped the ante in Vietnam, in 5 years there'd be half a million soldiers bogged down fighting a war that couldn't be won.  Kennedy and the rest of the Camelot Cabinet wouldn't wear this, so Ball left. 

On the advice of John Kenneth Galbraith (who'd gone the other way, from the economic sphere to the Kennedy government), he went into banking, about which he knew nothing special.  And after he'd got there, he went back to Galbraith and asked "Why didn't someone tell me about banking before?"

So what had shocked the clever Mr Ball?  Well, ask yourself a very simple question.

When you put that fraction of your hard-earned money that you can spare into your savings account, what happens to it? 

It is a comforting thought that it sits there, in some suitably secure place, until such time as you decide you want it back and withdraw it.  Comforting, but clearly wrong. 

If those neo-palatial bank buildings were little more than large safes, containing the sum total of their depositors' accounts, where do the banks get the money for that other half of their business - lending money out at a higher rate of interest than they're paying you for putting it in?

Ah, I see your thoughts in motion.  No, the banks don't just sit on the money, of course not.  What they take in on the one hand, they lend out with the other. 

Good.  But if they've lent out your money on, say, a 20-year mortgage, what happens when, as ever, you run short before the end of the month and need you money back?  Does the bank say, sorry, come back in 20 years time when our loan falls due?  (Assuming of course that it does come in and the borrower doesn't default.)

No, of course not.  Banks that can't pay out now, on demand, are in trouble.  As soon as word gets out that a bank may not have enough to cover their customers' deposits, then everyone is queuing at the door, hoping to get their cash out before it's all gone, as Northern Rock found out in the UK last year.

So banks are playing a sort of smoke and mirrors game.  But if you think you have seen through this mirror and this cloud of smoke, all you now see is more smoke and mirrors. 

The banks take your hard-earned 100 baht of savings.  Governments normally tell them they can't lend out all 100.  They have to keep a reserve.  Let's say 10%.  So they lend out 90 baht as part of the mortgage to X so that X can buy a fraction of a house from Y.  What does Y do with the 90 baht?  Well, they can put it in the bank.  Which can now lend 81 baht of it out again.  That 81 baht finds its way back into a deposit account and 73 baht goes out again.  This merry-go-round will revolve until your 100 baht has turned into a total amount of 1000 baht of loans and 1000 baht of deposits.

Except that 10% is abnormally high.  Northern Rock, playing by the rules of the Bank of England, only had to keep a reserve of 0.15%.  So £100 turned into £66,667 on each side of their ledger.

That's what no one had told George Ball.

Now throw in that problem of assuming the bank's loans do come good (and what the banks borrow is now in the form of financial derivatives so complex that most banks don't even understand them), and if you can peer past the last of the smoke and mirrors, you're looking at a cliff edge.  Northern Rock just got there a bit sooner than the rest.  No one really knows how the rest of the herd can be stopped.  Or if.

But there is a strange sign that a spiritual rescue of the banking system may be possible.

Newcastle United football team have endured half a century of winning nothing.  The hope of fame and glory has flickered more than once, and gone out.  But they have just experienced a second coming.  Kevin Keegan is back as messiah-cum-manager, within hours they win 4-1 even with a man sent off, and salvation is at hand. 

And which corporate sponsor has its name emblazoned on the replica shirts of the massed mystics in black and white stripes?

Northern Rock.