Banking is Broken (And We May Not Be Able to Fix It) - How Money Works

Banking has become too complicated and too concentrated for it's own good and this could have serious impacts on us all.

#Banking #Finance #HowMoneyWorks
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Banking is an incredibly important industry which is based off a very simple concept.

People with more money than they know what to do with can keep it in a safe secure institution which can then lend that money out to people who have big idea’s but not enough money to make them happen.

They give a small incentive to the depositors, and charge a higher premium from the borrowers, making a profit for the service that they provide as a “financial intermediary”

This system has become more complex over time with things like fractional reserve banking, and alternative capital sources, but if we strip all of that away we will still find that the heart of banking is this simple mechanism.

For all of the hate that banks get, they can do a lot of good in an economy. To people who want a safe place to keep their money they offer an almost 100% guarantee that the money left with them will still be there, a day, a month, a century from when it was deposited.

They also make that money readily accessible, online, over the phone, from a collection of ATM’s, or simply through a plastic debit card.

To people that want to borrow money they are also the “go to” institution for a fair loan based on lending parameters developed over time.

We may hate things like credit scores and employment checks, but it’s part of the reason why so many people are paying below 3% on their mortgages right now.