I have a question: isn't it a bit weird that a bank would advertise on its homepage the fact that deposits are guaranteed up to a certain amount by the government? Never mind the Chinese-fortune-cookie English of this particular one, but isn't that rather damning, like saying, "in case we screw up, the government got our back"?
One one level, I realize full well that if I deposit my money with a bank, they will convert it to electrons and shoot them all over the world to make their margin, and that inevitably a fraction will end up irretrievably lost in the pockets of the Victor Schirallis and Nick Leesons of the world. But the stubborn traditionalist in me insists that if I give money to a bank as a depositor, it should be safe in their vaults. If I give my life savings to a bank for a minimal interest rate, at least I should know they're not going to turn right around and loan the exact same sum out to some shmoe at a slightly higher rate. That would just be uncool, especially if the world financial system collapsed as a result of too many such deals and then the bank sort of shrugged.
Here's an idea: a message posted on a bank's homepage saying "Thneedbank would like depositors to know that, although sorely tempted, we do leave the bulk of your savings in our vault downstairs underneath the corporate gym. Actually, we do use a portion to make investments so that we can continue to pay you the promised interest rate -- and pay our tellers a pittance as well. But otherwise your funds are safe and unencumbered. Think of us as your interest-bearing safe deposit box. By the way, we have free coffee at our main branch, too."
Subscribe to:
Post Comments (Atom)
23 comments:
Indeed. I think it shows a fundamental problem with our banking system when people start to worry that their money might not be safe. Sadly I think this crisis will do little to change the habits of both banks and the ever consuming individual.
hehe, the ABN AMRO bank did that too, right after being bought by the government here. Rather sad and it was critisized heavily by all the other banks for doing so. In the end they took the ad down :)
Don't American banks usually have a little statement on their materials "Member of the FDIC"?
Mankind should do away with interest rates. This is the fundamental root of evil and the cause of much misery for so many.
Charging interest rate is a sin. I think there is even a word for that kind of sin. Escapes me now what that word was.
FDIC for mamma's information is the Federal Deposit Insurance Corporation that insured depositors accounts to $100,000 per account in member banks, now increased to $250,000 with the current bank and financial crisis.
As for interest in and interest out. It is the same for banks to use money (yours) that they pay interest for as it is for me to use that money (yours and others) and pay interest to the bank to hopefully turn a profit in my business. The banks hope to turn a profit also. Do you really expect the banks to store your money safely without having some money from somewhere to provide the facility and the employees. That all costs. Your fortune buried in a coffee can in your the back forty would be free, but then all it would do is depreciate, or more likely rot. Most people would not be able to fund a business with money squirreled away in a coffee can.
As for inner monologue, without interest there would be no Interest. Without Interest there would be no blog to comment about interest being a sin.
Do you really expect the banks to store your money safely without having some money from somewhere to provide the facility and the employees.
Yes, I expect banks to bury most of the deposits in a sort of coffee can, pay their CEOs less, and make their money by intermediating large-cap investments. (Did I use "large-cap" correctly?)
They call it a "deposit" for a reason.
Inner monologue (and maybe everyone else), I think you would enjoy How To Be Free by Tom Hodgkinson, an extremely English but readable book with lots of background about why usury is bad.
Referring to mamma's comment in the famous Estonia post, I think Tom is one of those 'shepherd persons' near a manor house. :)
There's nothing wrong with interest rates, if I lend someone money I expect some sort of return for the risk I'm taking. However most basic savings accounts pay virtually 0% interest which isn't right if the bank is making money off of my deposit. Usury (charging high rates) is another story, SMS loans and high rates credit cards should be banned.
If you're against interest rates most banks offer so-called "muslim accounts" which have different rules to take Islams views into i-rates into account.
it's called jews.
or rather: why the jews became to be so hated (other than by just being jews) was because of a theological point that no one should be able to sell or buy time because time belongs to God. And interest is in essence, making profit from time, so selling time. and therefore a sin for any (good) Christian. But! for Jews this didn't hold and no Christian was condoned for borrowing FROM jews and paying interest later on. And the myth of Jewish financial dominance has been perpetuated and resented because of all that. Nothing really to do with Jews themselves, just the fact that Christians were not allowed to amass fortune in that manner, resulting in resentment and jealousy and persecution of Jews.
you'd think that that particular idiocy (the interest rates being of evil) had died out a few centries ago but apparently not. Nothing begets nothing and so on...
There is a big difference between interest and usury - not even the same thing, actually. Extending the reasoning in some of these comments, I guess it is only ok to earn by manual labor, everything else is a kind of exploitation? The quote below seems apropos:
"Liberty. The left subscribes to the French Revolution, whose guiding principles were ‘Liberty, Equality, Fraternity.’ The right subscribes to the American formula, ‘Life, Liberty and the Pursuit of Happiness.’ The French/European notion of equality is not mentioned. The right rejects the French Revolution and does not hold Western Europe as a model. The left does. That alone makes right and left irreconcilable.
The left envisions an egalitarian society. The right does not. The left values equality ABOVE other values because it yearns for an America in which all people have similar amounts of material possessions...
The right values equality in opportunity and strongly believes that all people are created equal, but the right values liberty, a man-woman based family and other values above equality.
—Dennis Prager
Here's something you young guys should understand: BEER and Economics.
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers, hen said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $ 49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'
'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too.
It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'
'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
Spread the wealth!
Merriam-Webster says:
usury
One entry found.
Main Entry: usu·ry
Pronunciation: \ˈyü-zhə-rē, ˈyüzh-rē\
Function: noun
Inflected Form(s): plural usu·ries
Etymology: Middle English usurie, from Anglo-French, from Medieval Latin usuria, alteration of Latin usura, from usus, past participle of uti to use
Date: 14th century
1archaic : interest
2: the lending of money with an interest charge for its use ; especially : the lending of money at exorbitant interest rates
3: an unconscionable or exorbitant rate or amount of interest ; specifically : interest in excess of a legal rate charged to a borrower for the use of money
see 1 and 2 and tell me it is not synonymous with interest. Or rather, usury is always taking interest but taking interest is not necessarily usury.
and for whoever has to pay the interest, it is always usury.
On the topic I mentioned above, this is an excellent read (available also in Estonian) - it's tiny but very very good: "Your Money or Your Life: Economy and Religion in the Middle Ages, translated by Patricia Ranum. (New York : Zone Books, 1988)"
and explains a lot about the roots of modern economics and the values we so cherish nowadays ;)
ehm, sorry, forgot the author: Jaques Le Goff
If only paying taxes was like drinking beer! I'd pay my taxes everyday. :)
Beer is good, but I was more interested in the Muslim bank products. Especially Muslim loans (no interest) if they are available. I would give up beer to qualify.
Maybe I am old school, but I never really understand lending and borrowing. I just don't like it. If I want something I pay for it. In cash and in full. Nobody should ever borrow anything. If you have to borrow you are not successful by definition.
So I completely missed the housing boom. It never made any sense to me. Trust me, at times I felt like the only idiot in town. Until I discovered that I was a genius. :-)
Now, as I read more into the CDS house of cards coming tumbling down (How do you say credit-default swap in Estonian? Tillist tombamise ringmang?) I laugh. All these Ivy League MBAs are worth nothing. Nothing. Nodbody ever knew anything. It was all about playing the confidence game and the game is over.
"I got an MBA. Would you like ketchup and fries with that?"
Since I appear to be on a roll here, I add this link. This kicks ass: http://www.portfolio.com/views/blogs/daily-brief/2008/10/17/hedge-fund-manager-goodbye-and-f-you
So I completely missed the housing boom. It never made any sense to me. Trust me, at times I felt like the only idiot in town. Until I discovered that I was a genius. :-)
Even genii can profit from financial tips, like the practice known as "locking in profits".
I am a very debt averse person but there's a few things that I think are worth borrowing for: a house, a car (not that I own/want one). Hmm, maybe that's it. Other than that I agree with IM and think paying in full is the way to go.
I'm more than happy to lend though if I get a decent return.
oh yes, I completely agree that living on credit is a very stupid thing to do.
But sometimes loans are necessary and when people decide to take them then obviously there should be a profit to both sides. For the person taking the loan: getting something now rather than saving up for it (possibly for years if the something is a house for example). And for the entity giving the loan: the return of their money and then some.
I very much prefer the idea of paying off the loan in full. None of that "I only want to pay the interest and get it back through taxes anyways" thing that is so common here in the Netherlands. No, I want to OWN that for which I took the loan even if it takes me decades to pay for it. Nowadays they also have this really nice perk for when you take a loan - an option of a (life) insurance to go with it so that if something should happen to you who took the loan then the loan is automatically paid in full and whatever it is you bought will be left for the inheritors (who then have to pay ginormous taxes to the government for the inheritance).
anyway, I started out with the point that debt is a necessary evil, possibly even a part of human nature.
We made a big down payment on our car. Wouldn't have it any other way. Might be my imagination, but our bank is not as anal when we are a little late due to absentmindedness with making our monthly payment.
Lots of equivocation is possible about the charging of money on time. You could argue that, even if it is God-made, time is a thief (it depreciates the money) so interest can be viewed as a necessary compensation.
If you borrow butter from a neighbour, you shouldn't really return some butter that has gone rancid even though it may have been the same butter.
Post a Comment