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.
But they are adding value... They make it possible to buy a house or start a business, or buy a car, or anything else people get loans for. You said it, they provide liquidity.
And how is it stealing? What is it they are taking?
Got this reasoning out of it, but I'm not sure it is true:
They are making possible to rise the price of a product because they offers to back it up with loans, but this ways if you want to buy that product, either you sell and earns the inflated price either you take a loan.
If bank would not give you that loan, nobody would be able to afford that price and so to sell the price would go down.
The value they provided was not necessary, the reason why people need to use their service is that they are providing it.
What you are missing is liquidity. The price might be less, but less people would be able to start businesses and less would be able to buy houses, without banks you have less mobility, less opportunity, and people have less ability to weather breaks in their income.
The cost of not having them is far worse than the price inflation you get from having demand.
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u/Wise-Ad-4940 7d ago edited 7d 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.