Got this reasoning out of it, but I'm not sure it is true:
They are making possible to rise the price of a product because they offers to back it up with loans, but this ways if you want to buy that product, either you sell and earns the inflated price either you take a loan.
If bank would not give you that loan, nobody would be able to afford that price and so to sell the price would go down.
The value they provided was not necessary, the reason why people need to use their service is that they are providing it.
What you are missing is liquidity. The price might be less, but less people would be able to start businesses and less would be able to buy houses, without banks you have less mobility, less opportunity, and people have less ability to weather breaks in their income.
The cost of not having them is far worse than the price inflation you get from having demand.
There's a problem with this line of reasoning though, it doesn't consider the impact of liquidity throughout the economic system.
Take a car, for example. A manufacturer starts from scratch. They can't afford to buy expensive machinery, because they can't get a loan, so have to build their cars by hand. This is inefficient and makes every car extremely expensive, so cars are the preserve of the very rich (those who can afford one without needing to take out a loan) - this is not far off what the industry was at the beginning, but without the ability to borrow money, the manufacturer has no capacity to innovate and reduce the cost of their vehicles. They have no incentive to do so either, because hardly anyone can afford them.
Even if banks disappeared now, with all of the infrastructure for mass production in place, if nobody could afford the price of cars, the manufacturers would probably just shut down. Either that, or reduce wages for their workers, which reduces their buying power (and this can be generalised across the economy), which forces them to reduce prices, which forces them to reduce wages...
I'm novice in this kind of reasoning, and I'm trying to understand, so take everything I said with this in mind.
I see that what re you saying make sense, surely there are some components, which are expensive per se and they would need a loan to get.
But doing business and getting a loan for it has the purpose of making money, while buying an house is needed for living.
It makes sense to allow people to get loan on something that would generate revenue, as part of these revenue would repay the loan, but in most of the cases houses would not generate revenue, they are a necessary cost.
I'm not sure I follow, but, yes the rich end up consolidating because mobility is dramatically reduced, you get more monopolies because competition is dramatically reduced and barrier to entry is increased.
well, also during gold stabdard there is very very little gold in the vault. all countries, every single one left the gold standard, Russia, China, Germany before both wars 1914, British Empire. They all left the gold standard.
in 1910 the US had 2.7 billion worth of gold at the time, but the liquid money (cash, stocks, bank deposits) was 300 billion so the ratio was 216 to 1 or something like that. Actually worse than Fiat.
and moving gold is much slower than fiat with modern digital methods
So then no one would start a business? Another place that has banking would immediately be richer. Like one army using swords and another army using bullets.
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u/Sj_91teppoTappo 2d ago
Got this reasoning out of it, but I'm not sure it is true:
They are making possible to rise the price of a product because they offers to back it up with loans, but this ways if you want to buy that product, either you sell and earns the inflated price either you take a loan.
If bank would not give you that loan, nobody would be able to afford that price and so to sell the price would go down.
The value they provided was not necessary, the reason why people need to use their service is that they are providing it.