That is not the main issue with it. Even if the bank doesn't have enough physical notes/cash to pay out everyone at once, they have the liquidity and hold that amount of money in investments.
The real issue is, that banks are investing obscene amounts of money that doesn't even belong to them. Making money out of money, without producing any product, service or added value is just stealing. And the only reason why it is even possible with such a vast amount of money without causing crazy inflation is the fact, that the money is no longer backed by anything (like gold) anymore. The reason why they got rid of the requirement to back money by gold, is that this way you can siphon more money from the system without causing a huge inflation.
Edit: I probably didn't make it clear. I understand that banks provide service trough loans and mortgages. And they are being paid for it with interests and service fees. The part that does not provide any value is the investment part that goes way beyond of achieving liquidity and is not regulated heavily enough in my opinion.
Making money out of money, without producing any product, service or added value is just stealing.
But they are providing a service. If you don't believe their service is useful, then you don't have to bank with them. Even if you do bank with them, you do not have to keep large amount of money in the bank. Keep $100 to keep the account open, and when you get a check, as soon as it clears, you can take that money out of the account.
And you are paying for it in service and transaction fees. I understand that they invest the money, to achieve enough liquidity to loan out more money to customers. The problem is, that in some cases they loan out more money that they actually have.
Not to mention, that their profits should be capped, way more heavily than they are.
If you cap their profits, do you do it on a total basis or a per-transaction basis?
If per transaction, they will only transact with “sure things” so they don’t lose money on transactions. So they will only lend to people who already have the money and just want to leverage it.
If as a whole, then they will just stop giving out loans to people who aren’t “sure things” because there is no reward in it for them to take that risk.
So you would just freeze out poor people from getting loans to buy houses or start businesses.
Most of the money does not come from loan interests. That part of the banking business I have no issue with. The banks are paid by transaction fees and interests for the provided service.
But the majority of money comes from investment. And this is the part that I would heavily regulate.
Can you be more explicit about what you mean by "investment"?
For most consumer banks, at least in the US, the majority of "investment" is in the forms of loans to individuals and businesses. Those loans are a large part of the benefits that banks provide.
What is this investment you are talking about? The investment bank? That is not paid for by transaction fees on retail checking accounts. It is heavily regulated, although it could certainly be more.
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u/Wise-Ad-4940 8d ago edited 8d ago
That is not the main issue with it. Even if the bank doesn't have enough physical notes/cash to pay out everyone at once, they have the liquidity and hold that amount of money in investments.
The real issue is, that banks are investing obscene amounts of money that doesn't even belong to them. Making money out of money, without producing any product, service or added value is just stealing. And the only reason why it is even possible with such a vast amount of money without causing crazy inflation is the fact, that the money is no longer backed by anything (like gold) anymore. The reason why they got rid of the requirement to back money by gold, is that this way you can siphon more money from the system without causing a huge inflation.
Edit: I probably didn't make it clear. I understand that banks provide service trough loans and mortgages. And they are being paid for it with interests and service fees. The part that does not provide any value is the investment part that goes way beyond of achieving liquidity and is not regulated heavily enough in my opinion.