Jim Hlavac
Economic Theory
Economic Theory
      Banking is often disparaged as some necessary evil.  Bankers are
never up there in regard by the public.  But people downplay the
importance of banks.  And most people totally misunderstand the
nature of banking.

    Banks do not "loan" money, they rent it out.  They charge you a
profit to use the money they rent to you.   We use the word loan as a
mere convenience.  

    Since money is labor, people since the dawn of time have looked
for ways to protect their money -- their labor --because they know
that to lose their money is to lose their labor.  Since people are
cooperative creatures, from the dawn of time their was a need to pool
labor, thus pool money.  And in the pooling there was always a need to
pull the resources together in one physical place, to facilitate the
combining and use of the labor.  In a labor pool all the workers get
together in one place so that employers can have access to the pool,
and those who join the pool are willing joiners of the pool because
they know that is how they will get hired.

    Trade fairs are also like banks -- a place for many people to come
together with the products of their labor, and to combine and trade
and use the products.  Trade fairs are another form of labor pool, or
labor bank.  All the tradesmen have pooled their labor so that
customers can access all this labor in one place.  It is more practical to
go to one trade fair for an industry then to visit all the members of an
industry separately.  

    So too then with money -- money is labor, as much as goods
produced are labor.  Thus there was always a need to pool the labor --
or pool the money -- and that place came to be known as a bank.  Not
only is there nothing inherently wrong with banks, they are in fact the
opposite -- a requisite part of people's lives.  

    Those nations with strong banks are of course wealthier than places
with weak or nonexistent banks.   The recognition that banks are good
is what leads some countries to be wealthier.  In those countries
where banks are cooperative private money pools there is greater
wealth than in countries where banks are owned by the government.  
When banks are owned by the government the use of the resource is
of course driven not by practical considerations but by the whims
derived from the divine rights of kings.   

    People will labor less when there is no banking because they have
no secure way to preserve their labor.  Banks are great security
devices for money, and hence labor.   Indeed, one could consider a
bank like a power plant of labor -- where the labor of possibly millions
of people are brought together to maximize the effect of the labor.  
Labor is finite when one person must keep it all to himself in a 24 hour
day, but labor is infinite when it can be pooled in a bank.  

    The cry against banks is that they do bad things.  But there is
nothing inherent in banking that makes it bad.  Only the divine right
and bad morals make the individuals in banks bad.  Removing the
divine right is easy.  Removing the bad morals is impossible.  Thieves
will surface everywhere.  It is part of the human condition.  

    And when you get to thievery it is a natural thing: look at all the
species which will steal food from other animals.  Or the cuckoo bird
which will stash its egg in another bird's nest -- they are stealing time
and resources.