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Banks are not storing money. Banks lend money. They store only some ridiculusly small amount (something like 5%?) and lend everythig else. So in case everyone w
by Isinlor 7y ago
Banks are not storing money. Banks lend money. They store only some ridiculusly small amount (something like 5%?) and lend everythig else. So in case everyone wants to get they money back bank goes bankrupt, because they don't have that money. They would need to force on moment notice that money out of people they lend it to.
- mikeash 7y agoI’m well aware of how banks work. See my second to last sentence in which I describe how the price of storing money in a bank is set and why it can be negative. Banks are definitely storing money. They’re just not storing physical currency. They mostly store money in various financial instruments such as loans, which provides them with some revenue. If that revenue is sufficiently high, they can make all their money this way and set a negative price for their money storage services. But there’s no natural law that says the revenue potential must be that high.
- Dylan16807 7y agoWell either something has gone wrong with the money-lending part, so it's not making enough money to pay interest... or there's a terrible lack in competition and banks are keeping all the profits. It would be nice to blame the latter but there seems to be evidence toward the former.