What Banks Do

 Almost every modern person uses the bank. However, few of us know its actual purpose aside from it being where money goes and comes from. We should look at banks in light of history and the world, to determine whether we need them at all. After all, people do work in cash, keeping it in pillows or beds, to avoid the evil elements of the banks – which caused the last economic collapse.

The Role of Money and Banks Fulfill

The idea that we can eliminate money as a whole is more fantasy than goal: we live in a disproportionate world, where some are more skilled than others and some have skills that just are more important than others: a surgeon’s skills matter more on most levels than, say, a painter’s.

However, the painter, being a human, will have health problems which can only be solved by someone like the surgeon. The surgeon might require someone to paint his portrait, but he will hardly die if this does not happen – whereas the painter can if there is no one around with surgical skills. This means in terms of value, a surgeon is clearly worth more than the painter. But this also means that there’s little the painter can offer for the surgeon’s skills – if, say, the surgeon doesn’t need or want a painting. What, then, can someone with less valuable and or no skills do?

Money arises from this recognition of inequality, which will exist so long as people are unequal in their skills. So, you can get rid of paper money or cash and so on, but the need will arise again when people need to obtain services or goods that they can’t get directly.

What Banks Do

But where can you store that money? Banks arise as naturally as money. What do you do if you can’t obtain the necessary amount you need: just like not being a world-class painter means you need money generally, so you might need a certain amount that you can’t immediately obtain. Banks serve as storage and distributor and many other functions.

The History of Banks

The first banks were around in ancient Babylonia and Assyria, about 4,000 years ago. Organisations, like the Knights Templar, grew wealthy from their loans and storage and security. By taking a small cut for services, groups could grow richer and richer. Today, the concept remains the same: provide a service, despite that money belonging to a client, and take a certain percentage of that client’s money.

Consider the idea of loans and bonds, for example. If you wish to get a car or house, most people usually don’t immediately have cash on hand to make such a purchase. Banks make bond calculations by assessing various aspects of the client, the transaction, etc. This means they calculate how risky you are, what you are purchasing your history and so on. This must work more to their benefit than yours, of course, since they are the ones forking out all the money.

What banks do is make money, then: they do not do it for their clients, primarily, but for themselves. They can manage and invest, they can use their expertise to obtain more – but it is always, always to their benefit. Banks are not just for storage or magical places to give you free money. Banks then cater to a natural need and necessary dimension that arises from the natural and necessary existence of money – in whatever form it takes.

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Greg is a reader, researcher and writer. He has a special interest in business matters, as well as tech.