to think we'd be better off without the banks

[lexiepix]

The banks allow house prices to go to crazy levels by allowing people to get into eye watering debt. If it wasn't for the banks, houses would be much cheaper and people wouldn't have debt, that is just modern slavery. Imagine a house that just cost 2 years wage, no banks just save up and buy it outright. Or am i being stupid? Banks seem to make everyone poorer apart from themselves.

It is much much much much muxh more complicated than that.

If it wasn't for the banks nobody would have pensions, for one thing.

House burglary would increase, being that the thieves would want to get to the £200k stashed under your bed..

If we didn't have banks then we would still use a trade or barter service to obtain goods so money would still be valuable. What happens if you keep your cash under the mattress or bury it in the garden & someone steals it?

x post Why :)

First major flaw in your argument is that you don't have to be a bank to make loans to people. You only need to be regulated to take cash deposits from people i.e. a bank is a deposit taking institution. People would still get into debt without banks - look at payday loan providers, they are not banks.

A practical question.
So how would wages be paid? If they can't be paid electronically how are they paid? By cash? where is the cash going to come from if there are no Banks?

Money may be printed by the Government but its physically stored in the Bank of England and in the commercial banks.

?
digital currency, eg bitcoin is one way of doing without banks
Yes it would be good to not have the money supply under the control of banks and it is certainly NOT the case that the only alternative to the current system is a return to bartering.
?
It's not something that can be explained in a few sentences but there are books on the subject and information on the Web for anyone who wants to understand the issues and see how it works ?

I totally agree Suzie. Bitcoin / kyrpto currencys could and most probably will do away with the banks, it is probably the biggest invention in decades although its not widely understood yet.

en.bitcoin.it/wiki/Main_Page

What is the financial backing for bitcoin? Every coin and bank note in the country derives its value from the the fact that the State effectively guarantees its worth. Look at any bank note and you will see that it is a signed undertaking from the State acting through its Central Bank to pay you an amount. "Bank of England I promise to pay the bearer on demand the sum of XX pounds" signed by the Chief Cashier.

Who guarantees the value of your bitcoin?

Thanks Lexie :) I'm reading up on it just now, very interesting, the implications are radical :o ?

I was looking at bitcoins a few years ago for work. Spent £20 on some just before they surged in price - became about £200 .

If only I knew how to pay tax on that

ChazsBrilliantAttitude

Who guarantees the value of your bitcoin?

Who guarantees the value of your iPhone ? Or Betamax VCR ? Or a gold ingot ? Or tulips ? "The market".

Chaz, you are totally missing the point dude and not getting some fundamental issues about money.
there are other ways of doing things!
If you want answers then just do a lil research, I dont got the time to write you an essay :o

Bitcoins are not money. They are more like a commodity that has its price established by supply and demand.
bitcoin.org/en/faq#what-determines-bitcoins-price

Would you really be happy having your wages alter from week to week because of supply and demand? That one week your 100 bitcoin salary would be equal to GBP100 and next week it would equal GBP75. Especially bearing in mind that bitcoin are not legal tender so nobody can be obliged to accept them.

We would certainly be better off without banks as they are now.

I understand that even the mild proposals to separate the high street and investment arms of banks have now been shelved?

At present they are a massive, massive destabilising influence on the entire global economy, and beneficiaries of a myth that suggests that the current status quo is an absolute necessity to global stability. IMO if they are not properly reined in right now, and there is not a serious global effort to reduce their dominance, the whole system is in danger of going "poof". And that's going to make 2008 look like a walk in the park.

Mann's Legal Aspects of Money covers some fundemental issues about money
ukcatalogue.oup.com/product/9780199609178.do

I've only studied this to postgrad level

lurking husband

Who guarantees the value of your iPhone ? Or Betamax VCR ? Or a gold ingot ? Or tulips ? "The market".

Or, indeed....your house?

Lurking
The point is that the State stands behind a currency (which sometimes goes wrong - Weimar Republic). If you are relying on something with no real intrinsic worth (e.g. paper bank notes) to act as a store of value then you need some guarantee that the value will be maintained.

"lurking husband

Who guarantees the value of your iPhone ? Or Betamax VCR ? Or a gold ingot ? Or tulips ? "The market".

Or, indeed....your house?"

How often do you barter? The point of money is that it is a store of value that acts of a means of exchange between two people that is why an objective agreement as to the value of money is important. You don't walk into Sainsbo's have have them argue with you over the actual value of your five pound note. Imagine if you went to the till with GBP4.87 of items and you had them a fiver and they turn around and tell you that your GBP5 note now only has a value of GBP4.26.

The whole banking system, and how banks, not elected governments, essentially create money and control the money system, is terrifying.

If you're interested, have a look here:

www.positivemoney.org/

The level of wilful ignorance is astounding. Chaz you are going to get a sore head from all the banging against walls on this thread I expect

That's a really useful website lily;-I look forward to watching all the videos later .

stubborn, it's definitely worth a look. There are some very clear, logical and unsensationalist explanations by highly qualified people. And the organisation is actually trying to do something to effect change, in a reasoned and peaceful way, too.

I used to work in the City at the coalface of the global finance industry but agree with the sentiment which underlies your comment. The global finance industry is almost ungovernable in parts and has done great harm to a lot of people. However, the argument needs taking apart a bit.

First up it depends on what you mean by 'banks'.

The basic high street banking services of clearing and settling payment transactions is essential to our modern economy and poses no risk or harm to anyone. It needs speeding up and making more efficient but we al depend on it.

Then there is deposit taking and lending to domestic businesses and households. Here there was far to much lax lending encouraged and endorsed by Bank of England and despite the financial crisis the Bank of England is pulling out all the stops with zero interest rates to get us and businesses to borrow like crazy again. This is wrong. An economy built on excessive debt and house price inflation is totally unsustainable. This needs curtailing.

Then we come the large international money centre banks who do a lot of basic banking for international business, foreign exchange, trade finance, letters of credit, leasing on capital equipment, project finance, mortgages on office buildings, commercial paper lending and helping large corporations raise finance in the global money markets. This again is essential and with the backing of good security and prudent lending poses no risks and is essential to the global economy.

Finally we come to the investment banking industry and all the complex derivative and speculative financial market activity. Essentially trading highly complex financial instruments are investments mainly for short term gain with huge amounts of borrowed money provide dby the world's central banks at exceptionally low interest rates has driven global financial markets to unsustainably high levels again with a bubble inmany places that will burst with dire consequences. This is what poses a massive risk to the global economy and this risk has actually increased since the financial crisis. Indeed it is so out of control that worlds central banks (eg Bank of England and Federal Reserve and ECB and Bank of Japan and Bank of International Settlements dare not curtail its activities (eg by withdrawing quantitative easing or raising interest rates or raising capital requirements) without casing another financial crisis.