Banks are indispensable, they call out bankers the loudest and many people think. But is that really so?
In recent months, Europeans and Americans have suffered heavily for the mismanagement by bankers. Literally thousands of billions of euros have evaporated while the bank managers pampered themselves extensively.
Banks made themselves indispensable
Banks, is popular wisdom, are a necessary evil. They provide loans, they are “money brokers” who enable the holders of capital, in the form of savings, to get a return on their property in a relatively safe way: interest on savings. The bankers themselves lend this money to buyers who pay much more interest: people who are overdrawn, companies, mortgage borrowers. Even more shocking: bankers borrow extra money from the central bank at a very low rate: one percent in 2010, and then lend it out again at extortionate rates, five percent or more: the so-called fractional banking system.
Because banks control the total flow of money, they have made themselves indispensable. Capital owners have to go to a bank to keep their capital safe. Salaries are no longer paid in cash at the end of the month, as was the case in the past, but transferred to a bank account. Owning a bank account is therefore mandatory for everyone who is employed or receiving benefits.
Banks extort the population tens of billions
This 'system function', as it is called in The Hague, gives the bankers a powerful blackmail tool. By just threatening that their bank will collapse, the government, that is the Dutch population, has to help tens of billions. We had to do that in 2009.
The Icelanders have probably had to pay the hardest price. The people of this small country have to toil for decades to pay off the debts incurred by failing bankers. High spending to bail out oversized banks has also left Ireland beggar.
The Dutch treasury has also suffered serious damage. Our national debt has risen by tens of billions in one fell swoop. If the enormous ING concern (balance sheet total 1,300 billion, which is five times as much as the Dutch state receives per year) falls, the Dutch national debt even doubles in one fell swoop, because the Netherlands guarantees EUR 200 billion for foreign savings at ING. In short: we are in huge trouble thanks to the banks.
How does a stock exchange work?
On a stock exchange (besides of course things like options, bonds and the like) shares, pieces of company, are sold. The average investor does not have tens of millions in his pocket to buy a complete company. That is why companies with the legal forms NV or BV are divided into pieces, shares, each representing a miniscule part of the company.
The more trust people have in a company, such as Philips, the more Philips shares become worth. If confidence collapses, the shares will be worth much less. In addition to shares, you can also buy pieces of debt: bonds. Think of government bonds: pieces of government debt and corporate bonds, debts that companies such as Philips take out.
At the moment, only large companies and debts of large companies are traded on the stock exchange. Going to the fair is expensive. In the US, the IPO, the initial public offering, is a way to quickly get start-up capital even with a small company. As a result, the capital of savers and investors is sucked into the banks and the AEX stock exchange on the Stock Exchange (owned by Euronext). As an investor you can only invest in large companies. Small businesses have to go to the bank to borrow money and selling shares is very difficult. An expensive business broker has to be called in for this.
The stock exchange as a replacement for the bank
Wouldn't you want to buy stock from the baker around the corner, your furniture maker, or the travel agent you know well, instead of a low return on your savings? Or would you not rather have your mortgage paid by thousands of savers? Wouldn't you like to have the return on your savings that the bank makes on the overdraft?
Peer lending: lending directly to others
It could be if the function of a bank was taken over by local stock exchanges. Until recently, a peer lending system was active in the Netherlands: Boober. The English and American versions, Zopa.co.uk and Prosper.com, are still in existence. The banks were, of course, not happy with that.
Micro Stock Exchanges
It took some searching, but one appears in Australia real micro stock exchange to exist. What probably makes a difference is that the banks in Australia do not have as much to crumble in the milk as here in the Netherlands. Hopefully there will be such an initiative here too soon. At least one is already coming from the charity corner micro credit system which allows you as a private individual to lend money to entrepreneurs from the third world.