Monday, April 11, 2011
Even normal banking isn't capitalist
Wall Street needs no further discussion. It's pure Mafia and most people realize it by now.
But the status of actual banks is still questionable. Are they businesses or criminal syndicate operations?
Here's a quick test. In a functional market, a business that offers either a noticeably better product or a noticeably lower price will get lots of takers.
If 'real' banks were honest capitalist businesses, some smart banker would think of the idea of paying people to deposit money with him. The payment would have to be slightly above inflation to make it worthwhile. If this smart banker was the first to think of the idea, his bank would be swamped with money. He'd have so much cash that he could make loans without bothering with fractional reserve requirements, without needing to play securitization tricks.
In the current situation, no bank at all has thought of this idea. Nobody offers a 'rent' above inflation; you can't even get a 'rent' that approaches inflation. Therefore no bank is swamped with cash reserves from thrifty people around the world.
Conclusion: Actual banks are operating as something other than honest capitalist businesses. They are only playing Bernanke-Panke with free money from the Fed. Are they forced to do this, forbidden to solicit savings and make loans in the old capitalist style? That's how it looks.
But the status of actual banks is still questionable. Are they businesses or criminal syndicate operations?
Here's a quick test. In a functional market, a business that offers either a noticeably better product or a noticeably lower price will get lots of takers.
If 'real' banks were honest capitalist businesses, some smart banker would think of the idea of paying people to deposit money with him. The payment would have to be slightly above inflation to make it worthwhile. If this smart banker was the first to think of the idea, his bank would be swamped with money. He'd have so much cash that he could make loans without bothering with fractional reserve requirements, without needing to play securitization tricks.
In the current situation, no bank at all has thought of this idea. Nobody offers a 'rent' above inflation; you can't even get a 'rent' that approaches inflation. Therefore no bank is swamped with cash reserves from thrifty people around the world.
Conclusion: Actual banks are operating as something other than honest capitalist businesses. They are only playing Bernanke-Panke with free money from the Fed. Are they forced to do this, forbidden to solicit savings and make loans in the old capitalist style? That's how it looks.
Labels: the broken circle
¶ 8:04 PM
