Lending deposits should not be allowed for banks with deposit insurance

The Government does not need to borrow money because it can print it, it is because citizens cannot print their own money (unlike the Government) that they must borrow it if they want to get on the housing ladder.

For most people, the only way to get equity in a house is to borrow money from the banks (only people who borrow can get a house) because they are not able to print money of their own. The choice has become between having a mortgage or not having a house. It is difficult to have a house without having a mortgage, houses are for people who don't mind debt. It doesn't make sense for the Government to allow banks to increase the money supply, which removes the natural punishment for profligacy provided by the market, as it hurts the citizens. Reserves would not be removed from the money supply (they would count towards prices) if deposit insurance did not exist. Normally customers would lose out if their bank did not keep their money safe but with deposit insurance the banks and their customers are protected. Deposit insurance protects people who use a bank that lends deposits, which (the lending) is a bad thing only as a result of deposit insurance. Without deposit insurance banks and anyone else could lend money with no harm to third parties, the insurance Socialises lending. Deposit insurance means that when a bank makes a loan this increases the money supply because the deposits are protected, without it, lending would not increase the money supply. Banks cause inflation only because of deposit insurance.

In an ideal world banks would not lend money that has been deposited with them for safekeeping. They (the banks) should not be allowed to lend deposits if they seek also to have deposit insurance.