I don't always agree with Nicholas Kristof, Op-Ed Columnist for the New York Times, but I always respect his opinion. Kristof has a way of expressing himself that endears him to me even when I'm not nodding in affirmation of his point. In the case of the following link, I actually do endorse his message. Take some time to read this. It grabbed my attention because of my experience with banking, but I think anyone can relate even if you've not been in the field. Let me know what you think of this.
"Is Banking Bad?"
CLICK HERE FOR THE ARTICLE
4 comments:
Profit isn't evil, but the Federal Reserve Bank was born out of deception. I'll borrow money from a bank, but I don't like it. I will never use a bank to house any significant amount of my money. As a whole, they've proven to be incapable of managing risk. Check out THE CREATURE FROM JEKYLL ISLAND by G. Edward Griffin. Again, not against profits, but I despise usury. When a bank is able to lend multiples of what they have on deposit and charge even low interest, it's usury. They create a ridiculous profit by lending money they never really have.
Interesting thought. I'll take a look for that book. I think it is a rather difficult task to distinguish between "reasonable" profit and "ridiculous" profit. But I'm more interested in the angle on lending more than what they have.
If you liken the bank's loan to any other company's product, and their interest to any other's margin, then we're really just back to what's reasonable vs. what's ridiculous. Brokers and other folks in the general line of "middle man" or "salesman" are often making a margin by offering something that isn't really in their possession. Facilitators just want to be rewarded for their time and effort. And what should be the reward except "whatever the market is willing to bear?"
I see a big difference in being a broker making a spread on something you helped sell and charging interest on funds that never existed. Banks create money out of thin air, so the repayment of principal alone is profitable. It's not as if there's much of an opportunity cost on the funds the bank loans out. It goes back to the deceit that went in to selling the Federal Reserve system to the public. It was supposedly good for the economy. In reality, it was really only good for the banks and the government.
Isn't the banker's product simply purchase capability? Whether his product is backed by real gold or by faith alone, the product he accesses for you and sells to you at a spread really does enable you the consumer to go out and consume. Now there are some negative consequences in some examples of consumers' consumption, but I can think of quite a few examples for the "economy" and John Public that most people would agree are "good."
Even if one would grant that the original idea was flawed and possibly deceitful and intended for the benefit of the banks and government, the real-life results all these years later do seem to reflect some amazing opportunities and developments that might not otherwise have been possible. This doesn't excuse the individuals who greedily obtain ridiculous profit by abusing capitalism, as Kristof mentions.
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