Are banks and interest really needed?
Posted by admin on 22 Jun 2010 11:02 am. Filed under Other - Business & Finance.
Anders
If I buy a house, then I can take a loan, from a bank, with the obligation to pay back the loan at a certain minimum amount per month or year, with zero interest. Why is the interest needed other than to keep the bank going? I could take the loan directly from the government, and no bank is then really necessary.
If I buy a house, then I can take a loan, from a bank, with the obligation to pay back the loan at a certain minimum amount per month or year, with zero interest. Why is the interest needed other than to keep the bank going? I could take the loan directly from the government, and no bank is then really necessary.
Then what about if a company wanted to take a huge loan? The answer is: they will have to get money from venture capital companies, and the agreement they make is a deal between the company that wants the loan and the venture capital company that provides the money. No banks needed.
The same with other services banks provide. They could be done by ordinary companies.
I understand that in practice, banks are deeply integrated into society. But in theory, are banks and interest really needed? Would it be possible to have a totally interest-free economy?
3 Comments to “Are banks and interest really needed?”
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On June 22nd, 2010 at 2:13 pm
no without the payment of interest there is no motivation for those with the money to loan it out so no loan is available. in other words a interest free society is also a credit free society so you get to wait untill you have the cash to buy something. most people do not want to do that.
On June 25th, 2010 at 6:02 pm
well, it is just like saying, can you work without pay? if all human beings in the world can work without pay, than the bank needs not to charge you. and you said you can take loan for government. yes, it does have some program is interest-free assistant program to help you buy house, but you still need to pay taxes you live, and the taxes you paid is feeding the program to help others to own a house. so it would be possible to have a totally interest-free economy, as long as we all don’t get pay and work for free.
On June 27th, 2010 at 12:42 pm
You have some very good points.
I think that banks are mainly a facilitator of the flow of money. The only thing I disagree with in what you said is the government becoming a primary lender. Banking adds to the economy, and beauracrats are not primarily concerned with advancing the economy (and rightly so). Politicians should be looking at the advancement and protection of society.
As far as interest goes, it is simply a reward for risking the lender’s money. It is not necessary, but it is a reasonable expectation since there is no guarantee that you’ll get your money back. Also, if I give you a loan, I can’t use that money for anything else until you pay me back. Therefore, by the time I get the money back I have essentially lost value if you don’t pay me interest because I could have used the money for other investments that would have increased my worth, plus inflation, etc…