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"the whole point of having a bank is to create debts that are riskier and weirder than that" I actually think the average person (or business) would disagree w
by sir0010010 4y ago
"the whole point of having a bank is to create debts that are riskier and weirder than that"
I actually think the average person (or business) would disagree with this statement. The reason most businesses and individuals deposit money in a bank is first, to keep it safe and second, to make your funds available to send and receive payments without managing large piles of cash. This can be done without lending at all (see narrow banks) and in that case the bank can simply let everyone withdraw their money in the event of a run. Financing an office building could be done by a separate institution that sells bonds and then loans those funds to businesses at higher interest rates. This institution would be able to make the duration of its bonds match the loans it makes to customers.
- fdr 4y agoWhile I agree there are some issues with how banks comingle a pretty complex stack of claimants and assets, that's how things have been for a few hundred years, so...the average person/business person...(if you are right about them)...is wrong, and will be wrong for the foreseeable future. While I generally would support a direct Fed facility to handle the "utility" portions of banking, I think there are some dubious aspects and limitations of non-lending accounts. Namely, almost hydraulically, lending on something like treasuries tends to gracefully track inflation, i.e. consumptive power is maintained over time. This is another meaning for a bank to "keep your money safe" if you account for the money illusion. They aren't called "money markets" for nothing.