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> Banks do not produce, they have no income from dividends, so how they earn? They provide capital without which you cannot produce anything. They make money

by sumedh 12y ago

> Banks do not produce, they have no income from dividends, so how they earn? They provide capital without which you cannot produce anything. They make money by difference of rates between deposits and lending.

curun1r 12y ago
That's the theory and few rational people would argue that those services are necessary. But we've been in a tail-wagging-the-dog situation for a while now. The industry seems to believe that they're entitled to an increasingly large share of the world's wealth. They've seemingly forgotten that they're a facilitator of progress and don't represent progress in and of themselves. They recruit the best and the brightest to create ever-more-complicated financial instruments robbing society of the contributions those engineers/scientists would have made elsewhere. Much like the same cellular mechanisms that sustain life become cancerous when there is unchecked growth, the same financial apparatus that we need to facilitate progress becomes cancerous when its growth is unchecked and it loses focus of the purpose that it serves.
dgregd 12y ago
1. Banks do not need deposits to lend money to ordinary people. They lend money from FED, which 'prints' them. 2. If interest rates are low then Banks profits should be also low because of small difference between deposits and lending rates. Am I right? 3. Just like casinos in Vegas need capital donors, the ultimate casino also needs capital donors. Don't want to play on Wall Street? No problem, your pension fund (dumb money) is more than enough.
logfromblammo 12y ago
They provide currency, which can be used to acquire capital. Do not confuse this with providing capital. The person who gives you a fence-painting robot is providing capital. The person who gives you 10000 coupons for a free fence-painting robot is not providing anything, if the person who issued the coupons does not actually have any robots. Banks lubricate the machinery of business, theoretically making productive work more efficient. To the extent they do so, they can reasonably capture a share of those gains. But once they are trusted in that capacity, they are now in a position to take money by less-honest means, in a manner largely indistinguishable from their legitimate functions by the casual observer.

by sumedh 12y ago

curun1r 12y ago

That's the theory and few rational people would argue that those services are necessary. But we've been in a tail-wagging-the-dog situation for a while now. The industry seems to believe that they're entitled to an increasingly large share of the world's wealth. They've seemingly forgotten that they're a facilitator of progress and don't represent progress in and of themselves. They recruit the best and the brightest to create ever-more-complicated financial instruments robbing society of the contributions those engineers/scientists would have made elsewhere. Much like the same cellular mechanisms that sustain life become cancerous when there is unchecked growth, the same financial apparatus that we need to facilitate progress becomes cancerous when its growth is unchecked and it loses focus of the purpose that it serves.

dgregd 12y ago

1. Banks do not need deposits to lend money to ordinary people. They lend money from FED, which 'prints' them. 2. If interest rates are low then Banks profits should be also low because of small difference between deposits and lending rates. Am I right? 3. Just like casinos in Vegas need capital donors, the ultimate casino also needs capital donors. Don't want to play on Wall Street? No problem, your pension fund (dumb money) is more than enough.

logfromblammo 12y ago

They provide currency, which can be used to acquire capital. Do not confuse this with providing capital. The person who gives you a fence-painting robot is providing capital. The person who gives you 10000 coupons for a free fence-painting robot is not providing anything, if the person who issued the coupons does not actually have any robots. Banks lubricate the machinery of business, theoretically making productive work more efficient. To the extent they do so, they can reasonably capture a share of those gains. But once they are trusted in that capacity, they are now in a position to take money by less-honest means, in a manner largely indistinguishable from their legitimate functions by the casual observer.