Yes, I\’m sorry, the double facepalm is indeed the appropriate response to this foolishness being promoted:
We now see that demand-deposits are created out of thin air. Indeed, these are just ledger-entries from one bank customer to another. The creation of this credit causes a credit-induced boom that then becomes a bust.
How can we stop this? Conventional wisdom says get banks to have more of a capital cushion and there is no harm in that. More regulation they cry.
But money is simply too important to be controlled by politicians. Today two brave insightful MP\’s, Douglas Carswell and Steven Baker, have helped show us the way by proposing a bill to end this.
What is needed is to let people own their own money, with the banks keeping it safe for those that want complete peace of mind. Let the depositor decide if the money should be lent and for what period, until it matures. Remove all political control from banking. And let\’s have more language of the fiduciary rather than the gambler from bankers.
There are two reasons, thus the double facepalm.
The first is that we already have an entirely reasonable and useful system whereby you can deposit your money with a bank, it remains your property and no one lends it on to anyone else.
It\’s called a safe deposit box.
The second reason delves a little deeper into fractional reserve banking. The thing being that, well, instead of all of your and my rainy day savings sitting around doing nothing….they might not be much individually but gross they\’re a hefty chunk…we\’d rather like that such savings go off and finance industry. Or other people, at least do something other than leave economic resources, capital, sitting doing sweet fuck all.
And this is what banks do. They engage in maturity transformation. They take our short term, on demand, deposits and turn them into term, long term, loans to peeps who want to build, buy or finance something. Might be that new grommet machine required to cure the country\’s kids of glue ear, that house desired to home that family or even the government borrowing necessary to keep the police service running until the income tax cheques come in at the end of the year.
This is what a banking system is for: and to insist that banking should stop being banking is, umm, well, it\’s dim actually. Facepalm, double facepalm type dim.