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The Banking System Was Set Up to Fail

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Contrary to popular thought the banking system was not set up to benefit or service people. It was in fact something that developed over a long period of time in a piecemeal manner, which derived from one person's intention to make money from another person. The concept of interest was created by the desire of an individual who wanted more money than they lent to a borrower to be paid back. They could charge whatever they wanted in interest and only had a limitation on the amount from competition, which set a market rate. The initial greed of the lender created the concept of interest, which in time turned into a product in its self through competition and the business of money lending was born.

Over time the interest rate became the benchmark on investment return and the means to weigh up the value of comparative financial products. It also became a mechanism for economic control and is used to manage the rate of inflation through the Central Bank. The whole of the financial system is centred round the concept of interest, which is centred round the concept of controlled greed. This is where the problem really lies. The financial system was not set up to service the economy or create productivity this was merely a beneficial side effect. The banking system was set up to make money for the lender or in the current climate the managers of the bank itself.

It is at best a managed form of greed that hasn't really been managed for the last decade or so. Therefore it has really become greed on its own with no real intervention or at least nothing that benefited anybody in any great way. In fact the form of intervention that was applied by Central Banks was to lend more money by having a low interest rate, even if it meant lending to people that could not pay the money back. So this is what happened, the banks lent money to people who could not pay it back because they get commissions through lending. The money they lend is not theirs it is yours, so it doesn't matter to them if it is not paid back. The economy in turn grew through the investment the extra lending created. Then when it has to be paid back or the people that were lent the money, the banks knew could not pay back, fail to pay it back the economy starts to fail and people lose their investment.

The Central Banks took away the ability to control the greed of banking by taking away the competition of other lenders by giving banks easy and often free money. In the short term the banks and the economy grew enormously but in the long term the banks will fail and the economy will enter downturn, recession or depression. The beneficial side effect of banking which created production will be damaged and the stability of investment will go. The banking system was set up on greed other peoples greed made it work through competition, when that was taken away the system was set up for inevitable failure. In fact in terms of the individual benefit, someone has always lost out. The original 'one lender one borrower' model was advantageous to the lender, so the borrower lost out. The only thing that makes banking work is competition, which in is also based on greed.

The actions of the Central Bank and the lack of regulation has made the banking system a one sided monopoly, where the greed of one group of people has taken over.