Capital Mobility Keeps The System Efficient
Hey Jessavers
Many people still think banking works on a time deposit basis, that we as savers place our capital in the bank and then banks go out looking for viable ways to deploy that capital and then share the returns with savers. This couldn't be further from the truth, and in today's banking world, fractional reserve banking allows for IOU's to be used instead of money.
The capital you provide is used for business expenses; you get an IOU, they know you'll never pull out or know the vast majority won't take out, so they have enough float to cover it.
The banks then use products like loans and credit cards to create new money out of nowhere and then expect consumers to pay it back with an interest rate they use to fund their whole process and repeat this over and over again.
In years gone by it was still a limit on how leveraged banks could be with physical cash, but we continue towards a fully a cashless society those limits are now long gone.
No bank run, means banks run us
Since we don't have the ability to pull off a bank run well, we still sort of do, in a way. Still, very few people have the motivation to do so. They've been able to offer us lower and lower interest rates, more fees, shittier service, even negative interest rates, and consumers still stick with them.
We don't have the ability to manage our own money in modern times; we have to use 3rd party services, and without this ability to pull your capital from the system. It means banks can continue to operate inefficiently and focus on their profits over anything else.
Custody your assets
In Bitcoin, we have a bearer asset that's solely information based, that the market values and you can easily custody yourself. It takes properties of cash, gold and other forms of money we've had in the past and given us the best of all of it.
Having the unique ability to pull your purchasing power from a company, project, exchange, fintech service means they need to treat you well or you're going to move somewhere else.
Self custody puts the power back in the consumer's hands; they can dictate the terms. The service provider needs to attract their capital by offering superior services the competition or better rates of return.
I don't think the penny has fully dropped yet on this one and people are still very much happy to use custodial services and those that don't shop around to look for the best deals.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
Let's connect
If you liked this post, sprinkle it with an upvote or esteem and if you don't already, consider following me @chekohler and subscribe to my fanbase
| Safely Store Your Crypto | Deposit $100 & Earn $10 | Earn Interest On Crypto |
|---|---|---|
Posted Using LeoFinance Beta
