I assume you're talking about fractional reserve banking where a reserve of every deposit is kept internally and the rest is loaned out w/ interest charges - thereby increasing the overall money supply? yeah, i can see how you could relate it to a ponzi scheme - except that everyone knows what is happening when you deposit your money in a bank... the bank is not hiding the fact that it's using the multiplier effect to increase the money supply... and there is FDIC insurance for a certain level of your money at each bank... so those are 2 things that make it more on the up-and-up than a Ponzi scheme...
I wouldn't necessarily call it a ponzi scheme. However, I do liken it to embezzlement, since your bank is profiting from using your deposit for lending even though they claim to keep your deposit available for withdrawal "on demand." And the government allows it by insuring deposits via the FDIC. Of course, the FDIC doesn't have money just waiting in a fund, the Department of Treasury has to sell bonds to investors and the Federal Reserve (mostly the Fed as of late) to fund the FDIC, which essentially amounts to legal counterfeiting.
Uh, yeah, you can take out your deposit if you want. Now not everyone can, but that's why bank runs are bad, and besides, if banks can't lend out your money, why even store your money in a bank? Not to mention....what the heck is "legal counterfeiting"? Counterfeiting is creating money illegally, after all, and that is a right which the government rightfully possesses. The "government prints moniez inflation" stuff is just a scam by Glenn Beck types.
umm... because if you default on a payday loan you aren't subject to physical harm or blackmail... like defaulting to a loan shark. instead payday lenders will go through the legal system and try to repo your assets...
Fair enough. I was exaggerating a little bit about the Ponzi scheme but I do feel the stock market is broken.
I pretty much answered your question in my previous post, but seems like it was obviously ignored *smh
probably great short films like this one: <iframe width="560" height="315" src="http://www.youtube.com/embed/ZPWH5TlbloU" frameborder="0" allowfullscreen></iframe>
Before you say it's broken, you'd have to say what it's supposed to do for the people who set it up and control it. Here's an analogy: the golf handicap system was up up by golf pros who used to make squat, were actually second class citizens at their clubs but gambled with the members. The good pros shoot around par usually, couple of stokes over. The handicap system only allows amateur golfers 90% of the difference between par than their score, from their best 10 rounds. Best rounds I ever play and I only get 90% of the stroke difference, so I have to play 10% better than I ever have played just to tie. Amateur,you are not going to beat the pro in his system. That is how he makes his living. Not any more but that's the way it used to be, back when they were setting up the stock market.
Do you intend for banks to only make loans based off of the fees they make from debit cards, overdrafts, and possibly a monthly fee just for having an account? Those fees would be much higher than they are now. And say goodbye to the interest you earn. They would only be able to lend a fraction of what they can now. Loans would then have to come from investment banks/funds/etc that aren't affiliated with a "deposit on demand" bank. These banks would take deposits from investors and lend money to individuals (mortgage, credit card), companies, and governments and return a portion of the interest earned to investors. Of course, we already have these investment vehicles. They are called mutual funds, ETFs, REITs, etc. Would this really be a better world? I think that this would only further increase wealth disparity, as savers would make no money without taking risk that they might justifiably be scared of taking now that we've had several boom bust cycles in recent memory. People with extra cash and the ability to take more risk would reap outsized rewards.
Anyone who wonders about economics should check out the Kahn Academy videos about it. The man who made the site originally worked at an IB, so it aint just kids stuff. http://www.khanacademy.org/#current-economics
Easy credit is what causes the boom-bust cycle. And smaller banks are already capitalized by investment banks. Essentially, nothing would change except that banks would actually have to face the risks associated with their lending. Savers would be rewarded by having higher returns on their savings, and interest rates would eventually come down because of higher interest rates incentivizing more people to save, thereby increasing the pool of loanable funds. And I'm not saying that fractional-reserves banking should be illegal, but rather that it shouldn't be allowed unless it's agreed to voluntarily by the bank and the depositor.
