Banks are able to increase the money supply and yet there is no Democratic accountability, unlike with the Government.
The existence of deposit insurance means that depositors don't care whether or not the bank is making risky loans, which enables the money to leave the banks, only to be recycled again as deposits. If there is deposit insurance there is nothing to prevent profligate banks from taking (and thereby creating) almost unlimited deposits. Then an account at a bank with a good reserve ratio is worth the same as one at a bank with only very few reserves.
Deposit insurance makes the reserve ratio irrelevant for customers and so there is little disincentive against banks lending recklessly, the owners, shareholders, management and employees are still able to collect earnings (from interest payments) even if the reserve ratio falls and the bank falls into a version of insolvency. It is not surprising then that the banks do not explain their system better, printing money is not something most people would welcome.
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