The Oxymoron of modern banking and the economy

A

AustralianAustrian

Active Member
From today's media. How could both these stories be true? I thought banks lent money so the economy can grow - so if a bank is profiting from growth then the economy should also be growing, right? Could it be that CBA are profiting from wealth transfer from customers rather than wealth creation with customers. ;)

Record bank profits
http://www.abc.net.au/news/2014-02-...urges-16pc-to-more-than-4-billion-in-/5254008

Record jobs losses.
http://www.theaustralian.com.au/bus...hits-10year-high/story-e6frg926-1226825959277
 
At its most simple, a bank is basically the borrower and lender of money. All the rest is just noise!


OC
 
Old Codger said:
At its most simple, a bank is basically the borrower and lender of money. All the rest is just noise!


OC
Click to expand...

As I understand, it we lend as unsecured creditors, and they invest as secured creditors, having insured their risk against their borrowers' assets.
 
JW,

"As I understand, it we lend as unsecured creditors, and they invest as secured creditors, having insured their risk against their borrowers' assets."



Back in the olden days, a Branch Manager that allowed an UNsecured (dud) loan may well find himself transferred to Boulia in Qld for the rest of his 'career'. As for the other side of the transaction, most money flowing into the bank in those days was simple cheque accounts, savings accounts, and fixed deposits.

Cheque accounts rarely earned ANY interest, and savings accounts only a minimal rates, and FDs were competitive with what you could get for 30/60/90 day money anywhere.

So, ALL money lent out earned interest at the market rate, SOME money 'borrowed' earned interest as above. Life was simple in those days!


OC
 
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