Modern banking

This article here tells us about problems with modern banking.

The overall concern is related to the negative impact of negative interest rates. If it is cheaper to hold money rather than pay a bank for holding your cash, individuals will begin to hoard their cash.

Hoarding… We used to call that “Saving” and said it was a good thing. Placing your money in a bank only had one purpose: Investing. That is, lending your money to the bank at interest and they would lend it to other people, at higher interest. (See the movie “It’s a wonderful life”) But now that banks can borrow money for free from the FED, it would be stupid to pay you to borrow your money.

Economically, it doesn’t matter one bit if the money is in a bank or it is in a pillow case under the CEO’s desk. The only difference is the convenience of the user to access the money and use it to buy stuff. And if the bank’s only purpose is managing those transactions for the company, then they SHOULD charge for that service. If the money is not being invested, it is already being “hoarded”. Where it physically sits (bank or under CEO’s desk) is not relevant to the discussion. Thus, there is no interest in the government or the bank or anyone else to “correct this problem”. There is no problem to fix. It is a strictly private matter of a CEO deciding how best to store the assets of his business.


About No One

I am totally non-threatening
This entry was posted in Economics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s