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Could the US economy work without the banks?
By Rose | March 9, 2008
water_skipper asked:
Could the US economy work without the banks? If ALL the banks in the US were closed because of a bank run or something, could the economy still function?
Brice
Could the US economy work without the banks? If ALL the banks in the US were closed because of a bank run or something, could the economy still function?
Brice
Topics: US Economy | 5 Comments »
March 9th, 2008 at 9:19 pm
Maybe…but it’d be very devestating. That’s kind of what occured back in the 30s. People took money out of banks and many banks had troubles. But our country got through it- thanks at least in part to the New Deal. I don’t think life will get so bad here as there are controls to ensure a BIG recession or depression won’t occur, and many countries depend on our nation for a strong economy so they won’t let our country collapse.
March 11th, 2008 at 4:09 pm
The US economy (actually any well-functioning market economy in this world) is a living organism, with its “natural” requirements and needs. One of these requirements is the timely provision of “fresh blood”. On the economy-wide level, money plays the role of blood, and banks are the “veins” though which this “blood” is directed to those places where the need for it is the greatest (i.e. where the highest return can be found). Now imagine that the heart of this organism (suppose it’s Fed) wants to provide this “fresh blood”, but it doesn’t know where to direct the flow to; even if it knew, it simply wouldn’t be able to do that since the necessary channels (i.e. banks) are missing! Another example: suppose you live in NY, and you have an excellent business idea and you are confident that it will succeed, but unfortunately you have no starting capital; there are no banks around, so you have nowhere to borrow from; and suppose another individual in LA has the necessary amount, but he has no idea how to use that. Since there is no way for you to meet him, you end up with your ideas unrealized, and this guy in LA ends up spending his money in an unproductive way. But if there were a bank, it would successfully bring you two together (of course, having its share from that
). Actually this is how banking institutions were originally created. I suppose now it is at least roughly clear what an important job banks do in a market economy.
March 12th, 2008 at 10:00 am
The banks are not required for the US economy to work/exist. The US used to print its own money (the Greenback).
Now the World Bank and the IMF are responsible for the creation of money which is lent to their ‘franchises’ i.e the FED, the bank of Canada, etc. These franchise banks then lend money to nations and charge an interest that the citizens (or production unites as we are called) must repay. We are production units and our nations have used us as collateral to acquire the loans.
There are many movies on the issue; the best one is probably “The Money Masters”.
March 14th, 2008 at 11:38 am
There are now other institutions which do many of the things that “banks” do so we could do without them, but not what they do. We need financial inter-mediation where saved money can be loaned to people and business for capital markets to function.
March 16th, 2008 at 7:10 pm
No, of course not. How would people live without money in a country that is based off capitalism. There needs to be a system for people to have acces to their wealth, unless they hold their own wealth in their own ways, but then it wouldnt be much of a U.S. economy anymore, and barter would take over. It just isnt possible for what you asked to happen without any devastating side effects, which is total collapse of the system. Of course, I believe the system will collapse within a few years, so we will see how it is when the last bank falls, to say the least it will be chaos, you wont be able to leave the country, people will start killing eachother, a revolution will happen to overthrow government and military and we will begin constructing a new type of economy not based around greed.