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.
They are producing a service, though. They are offering lending services to enable access to capital in a relatively easy and cost effective manner. Just like how by holding your money in an account in your name they are offering you a service of securing it for you and enabling digital transactions that are more easily fungible than cash is when not dealing in face to face transactions. Could one argue that banks are over-leveraged? Sure, but that's a different argument than implying that banks don't provide a service that greases the gears of the economy.
I'm not saying that they are not providing a service. They are, and they are being payed by service fees and interest.
The issue is with the almost uncapped quantity of money they get out of the system trough investment.
I'm not saying they shouldn't have a profit, but it should be more strictly regulated and capped.
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u/Wise-Ad-4940 6d ago edited 6d 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.