The power of the bankers is ultimately based on the fact that monetary theory has never managed to develop a reasonable concept for its own object of study. To this day, monetary theory is floundering around with the ideas derived from the quantity theory and is not making any progress. In fact, it was probably quite appropriate until the gold standard was abolished. Since there is no longer a gold standard, a theory that makes the quantity of something the central theme is no longer justifiable. Market theorists have certainly seen (or suspected) this, but with the enthronement of central banks, a way was found to save the idea of quantity after all.
The background to this is, of course, that something that is not subject to any quantity restrictions should be made available for welfare reasons until its price has fallen to zero. You don't have to think about it for long to know that such a constellation is unacceptable for banks. The issue of the price of money is a classic mental trap, because a price is the exchange rate of monetary units per unit of goods. A price for money - where the numerator and denominator of the price are the same unit - is, on the other hand, a dimensionless number, so that no one has dared to declare this number as the price of money. Instead, interest was declared the price of money, although interest is a price for the temporary lending of money, not for money itself.
Once you have recognized this, it becomes immediately clear that the calculation of interest is only justified on the basis of credit risk, while the undifferentiated extraction of monetary assets has no legitimate basis. In addition, the banks do not even produce the money they lend themselves, but have to obtain it from the central bank. However, since their ability to create money is unlimited, the argument that interest can only be charged on the basis of risk applies even more to them.
This means that banks are not "producers" at all, as they often describe themselves, but rather simple service providers who cannot even produce their "tools" themselves. However, this fact is denied by many NGOs and even the BoE, and instead the conclusion of a loan is celebrated as "money creation". The point is that money is a means of payment with which one can pay off liabilities. The much-quoted "deposits" are actually only liabilities of the banks - and no one can pay with liabilities.
But because it is now good "progressive" thinking to regard these errors in thinking as the truth, the power of the banks is being consolidated again by such logically untenable constructs, after the reputation of the banks suffered greatly after the last major derivatives crisis. Ultimately, it is the "fake news" about the banking business that gives the banks an authority that they really should not have at all.
But what can you do if people want to believe, for emotional reasons, that there is "money" in their bank account? You can try to explain to them that the deposits in the bank are on the wrong side of the balance sheet to be money - they will not and do not want to understand.
The power of the bankers is ultimately based on the fact that monetary theory has never managed to develop a reasonable concept for its own object of study. To this day, monetary theory is floundering around with the ideas derived from the quantity theory and is not making any progress. In fact, it was probably quite appropriate until the gold standard was abolished. Since there is no longer a gold standard, a theory that makes the quantity of something the central theme is no longer justifiable. Market theorists have certainly seen (or suspected) this, but with the enthronement of central banks, a way was found to save the idea of quantity after all.
The background to this is, of course, that something that is not subject to any quantity restrictions should be made available for welfare reasons until its price has fallen to zero. You don't have to think about it for long to know that such a constellation is unacceptable for banks. The issue of the price of money is a classic mental trap, because a price is the exchange rate of monetary units per unit of goods. A price for money - where the numerator and denominator of the price are the same unit - is, on the other hand, a dimensionless number, so that no one has dared to declare this number as the price of money. Instead, interest was declared the price of money, although interest is a price for the temporary lending of money, not for money itself.
Once you have recognized this, it becomes immediately clear that the calculation of interest is only justified on the basis of credit risk, while the undifferentiated extraction of monetary assets has no legitimate basis. In addition, the banks do not even produce the money they lend themselves, but have to obtain it from the central bank. However, since their ability to create money is unlimited, the argument that interest can only be charged on the basis of risk applies even more to them.
See: https://reneemenendez.substack.com/p/taking-the-risk-premium-seriously?utm_source=profile&utm_medium=reader2
This means that banks are not "producers" at all, as they often describe themselves, but rather simple service providers who cannot even produce their "tools" themselves. However, this fact is denied by many NGOs and even the BoE, and instead the conclusion of a loan is celebrated as "money creation". The point is that money is a means of payment with which one can pay off liabilities. The much-quoted "deposits" are actually only liabilities of the banks - and no one can pay with liabilities.
See: https://reneemenendez.substack.com/p/who-is-transferring-money-when-a?utm_source=profile&utm_medium=reader2
But because it is now good "progressive" thinking to regard these errors in thinking as the truth, the power of the banks is being consolidated again by such logically untenable constructs, after the reputation of the banks suffered greatly after the last major derivatives crisis. Ultimately, it is the "fake news" about the banking business that gives the banks an authority that they really should not have at all.
But what can you do if people want to believe, for emotional reasons, that there is "money" in their bank account? You can try to explain to them that the deposits in the bank are on the wrong side of the balance sheet to be money - they will not and do not want to understand.