Odd Things: Why on earth do we let the Banks do it?

Right now the banks in the United Kingdom are in business and able to trade in markets by leveraging their depositors’ funds. Their depositors are only placing such funds on deposit because the government of the United Kingdom has given a guarantee supported by the taxpayers of the United Kingdom, many of whom have deposited the funds which are being guaranteed. Without the depositors funds the banks would not be able leverage and that would prevent them dealing in markets for profit (or loss).

The guarantee that the taxpayers provide is provided in the interests of stability, particularly economic stability. There is no separate payment for that guarantee. The taxpayer does not get a bonus if the traders are successful in making money. The traders get the bonuses if they are successful in making money.

This is a very odd state of affairs. You get thirty million people to put some assets down to enable a few thousand people to speculate with those assets. If the speculation is successful the few thousand (and their employers the banks) make a great deal of money. The thirty million make nothing. If the speculation is unsuccessful the thirty million pick up the bill.

The oddest thing is that this state of affairs has continues since 1997.

One Response

  1. In your scenario you ‘gloss over’ the traders’ activities which in my view are creating a very unfair society.

    Speculators are somewhat like highwaymen or ‘robber barons’ extracting tythes. They take the profit but contribute nothing.

    Eg, speculating on commodities like coffee, oil, wheat or currencies so as increase the selling price (and their mark up) but without any of that increase going to the producer. This means impoverishing good producers and exploiting consumers.

    Trading shares, commodities, loans etc just means the banks/traders/directors can enrich themselves because they can gamble using free money.

    It is outrageous that the banks’ traders can use our money to fund this socially useless activity. The corollory of which is that producers and consumers get progresively poorer as companies’ profits diminish and prices escalate.

    The result is that the wealth of society becomes more and more concentrated in the the banking system.

    There are cartels of energy/utility sellers, media and retailers who also take disproportionate profit. This creates an unfair and unproductive society because wealth is hoarded by the unproductive sector.

    As has happened in previous civilisations, the most financially attractive occupations now are those in banking, retail, utilities etc which seek to exploit the hard work and productivity of others.

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