Basically bankers are like lawyers, gardeners, cooks, doctors, pool cleaners etc: service jobs to help other people get things done. When you elevate the sector to have implicit value you get a terrible distortion.
Not sure I agree with putting doctors and cooks on that list. Providing services basic to life is not the same as supporting recreation, wealth, or luxury.
To put a finer point on it, doctors and cooks, along with farmers, builders, teachers, daycare workers, et al. existed ever since everyone started specializing. They directly support life needs.
There have been gardeners for at least as long as there has been civilization. Entertainers have probably always been around. Your idea of "life needs" doesn't seem to coincide with history's.
If we diverted billions of dollars to doctors or cooks we would gain the benefit of increased, more healthy lifespans.
If we did the same for bankers we would get, well what we got in 2008.
The difference between service jobs which are purely symbolic, in that they only work within human created environments, only interface with other people and ultimately the only arbitrator of how good a job they do are people and those which have to deal with the real world at least tangentially is huge. Artists and banker are in the former category, doctors, gardeners, cooks are in the latter.
Not always. Finance is a pretty big industry and its hard to make a sweeping generalization like this.
For example, let's look at your checking account. A banker's not a middleman here - they're providing a service that allows you to keep you money safe for free while they invest it and assume the risk. Seems like a good service to me.
The bank doesn't invest your money. You lend it to them and receive very little interest in return. They separately create brand new money to provide loans to other people, mainly for purchase of existing assets. At no point is your money given to anyone else.
Update: Having been down-voted below zero... I would encourage everyone to visit the Fed, BoE, ECB, BIS etc. websites and discover how money is created. We would not be in our current economic state if this was better understood.
Yes they do. That's why runs on banks are a problem. Only the central bank (at least in the US) creates money. And you can't invest your money in the central bank.
When a US bank approves you for a loan, it simply credits your account with new money. This money does not come from other accounts, i.e. this "investment" in you is made entirely with new money, created by the bank. When you repay the loan, the money disappears from the system.
There are limits to how much money can be created in this way, but those aren't relevant here.
You are correct. Fractional reserve banking is a myth . Banks do not lend out deposits. Deposits come from loans. Reserve requirements do exist but they do no limit bank lending. Lending is only limited by demand for loans and capital requirements.
Here is a pretty good site which explains how the banking system actually operates in detail.
I didn't downvote, but the parent is conflating money with credit. Banks and other lenders create credit. Only the Fed creates money. When credit starts to contract and economic growth isn't strong enough to sustain increased creation of money you get a deleveraging, as we recently experienced.
So yes, in one sense banks do create "money", but what you're calling money is actually credit.
That's not "creating" money - you have "money" in your account, but that's just a number. In reality, that money is on the bank's balance sheet, and it can lend it to others (or a part of it, depending on the regulations). It can also lend money that was actually created by the central bank and loaned to the commercial bank. But regardless of the number on your account, if the bank runs out of money (is insolvent), your money is gone (absent government guarantees/bailouts).
You are confused. There is no such thing as a loanable funds market. The guy at the bank making the loan does not call the other guy at the bank to look in the safe and see if the funds exist to loan out. Doesn't work that way. Banks have to have appropriate capital ratios in order to stay in business and be considered solvent. Those ratios are entirely determined by regulation. By and large, the only thing stopping a bank from 'creating money' or making a loan is the willing and able consumers.
>For example, let's look at your checking account. A banker's not a middleman here
Yes, he is. He takes your money and lends it out to others, whom he charges for the privilege. That's how fractional reserve banking works.
Of course, these days since interest rates are zero, that's not really a profitable line of business. It's mostly used to upsell the more profitable products like mortgages or credit cards.
Yes, but the service that he provides is a secure place to store your money. You pay for it by giving the bank money that it can use as "collateral" (in the fractional reserve banking sense) for the loans it gives out, instead of paying with fees.
I agree with a caveat. In the grand scheme of things everything is a service to help others get things done (there is no final all important job) and there needs to be a balance.
Since the start of the industrial era, energy extraction has been the linchpin to civilization. Without net energy available to society to do work, we could never sustain such a huge population.
Another way of stating this is that those jobs are all part of the "Tertiary Sector"[0], but I disagree that those jobs have no inherent value. Providing a service is valuable.
