Well because then you jerks I wouldn't have a job.
Sometimes Henry Blodgett shows his ass. It's not like Fractional Reserve Banking is new. The concept was a few hundred years old when Columbus used it to finance his voyage not-quite-around the world. The problem with banking isn't "banks" it's "investment banks vs. commercial banks". So it's like this: Your "bank" is technically a "thrift." At least, it was from 1933 to 1999. Thrifts aren't allowed to invest for financial gain - in other words, play the ponies. Thrifts aren't allowed to play the ponies because Stock Market Crash of 1929. However, in the go-go '90s what could go wrong and all of a sudden everybody is playing the ponies, and the thrifts wanted in on the act because virtually nobody remembered history. The Glass Steagall Act was enacted in 1933 to prevent the thrifts from playing the ponies, and torn down in '99 so they could once again play the ponies. Wanna see a great quote about that? Here's where it gets funny. Business Insider was founded by Henry Blodget, who was one of the pony players back in the '90s. Whether he was good at it or not isn't really at issue; fact of the matter is he was damn shady at it, paid hefty fines and is forever banned by the SEC from ever playing the ponies. But if the Fed gets into the game of pony-playing, YAY! All bets are off. An absolute essential primer on fractional reserve banking is Money as Debt: And Michael Lewis wrote an absolutely spectacular book about what happens when you repeal Glass-Steagall called The Big Short."I want to sound a warning call today about this legislation," he declared, swaying ever so slightly right, then left, occasionally punching the air in front of him with a slightly closed fist. "I think this legislation is just fundamentally terrible."
Not all banks. They served a purpose, once upon a time. Once upon a time, banks were meant to be strongholds; safeguarding the wealth of those who trusted the banker enough to keep their material wealth in one of the banker's safes. A small fee would go into the pockets of the bankers. Then, banks would survive by lending out the money they'd been given.. The bankers would loan you money at an interest. There's the beginning of the rot.
See, interest demands you pay back more than you loaned. As long as there's real money, it's not nice but meh. You might be able to earn enough money to repay your debt and the interest. However, nowadays banks create money out of thin air by coloring paper and calling ir money on the one hand, and adding a few ones and zeros on a digital bank-account on the other hand.
You see, the Federal Reserve as well as the ECB are (semi) privately owned banks who charge the governments interest on the money they borrow. But the Fed and ECB do not make money with inherent value (ever since we lost the gold-standard, money isn't linked up to anything but debt), but rather take paper; color the paper, cut the paper and then say: this is now money. Oh, and you need to pay us 10% extra of what you just borrowed, just because we took, colored and cut some paper which we say is money. The idea of fractional reserve banking (look it up if you don't know what it is: there's a couple of great Youtube-vids which'll explain it like you're 5) has been the cause of a financial hyperbubble: when 1 dollar in reality equals 9 dollars in virtual reality, but your debt stays real, you've got a problem. By no means am I religious man but I do understand the story of why Christ, the prince of peace, took to beating the money-lenders out of the temple. If you want banks with a minimum of reliability and have it function as a tool rather than as the bloodsucking parasite it has become, consider breaking up the banks as they are now, forbid fractinoal reserve lending, re-instate Glass-Steagal and consider that 'Too Big To Fail' really means 'Too Big To Exist'. I'll have my answer off the air, Art.
This is a pretty terrible idea. Concentrating lending and money creation to one institution like The Federal Reserve is idiotic because concentrating any immense power to a small group of individuals is ripe for corruption and blunder. Alternatively I would argue why don't we let banks fail more often. Then have depositors be smart when they put there money into different institutions. If you think that BofA lending out thousands of subprime mortgages in Arizona and California is a bad idea then don't put your money in BofA put it in another institution that you trust more. If you want more regulation then make what the banks are doing with there money more transparent. Most average people who do not have a very good understanding of finance and markets are always so apt to say, "we need more government control." That is very unwise because as bad as our financial institutions can be at times our policy makers are much worse.
No time to read this right now (also tend to avoid BI in general), but banning banks is a silly overreaction when there are alternatives.
Interesting. But if the ability to "create" money were stripped from the banks and left on the FED alone, it may be one more reason for banks to drag their feet in the lending process. Everyone remembers 2008 and the aftermath. Banks being irresponsible led to the disaster but it was banks being overly frugal that exacerbated the problem. Imagine you owned a contracting business that used to have a $1mm line of credit in 2007? Guess what, in 2008 that thing disappeared. You now owed $200k to a construction materials business and couldn't pay it. Both you and the construction materials business were kaput by 2010. Between the two of you 100 people lost jobs. Between those 100 people, 50 more service providers (cleaners, landscapers, babysitters, etc) lost jobs. -This story happened a lot. I saw it first hand and still see the effects of it to this day. My point is that if the banks have even less control of the cash-flow process they're likely to be even more stingy with loans.