> Perhaps most amazing is many people's apparent assumption that banks would never engage in this kind of behavior.
I was sort-of witness to a shouting match between a well educated son and his hard-working working-class rest of the family over the fact that banks give out let's say ~ten times as much as they actually have. They called him stupid, outrageous and how could any company possibly do this and they can certainly not run their small wood-shops and small companies like that so how should a bank be able to do that? Mind you, these are average good natured law abiding folks, the kind that certainly is the majority of the population.
This goes to show that there certainly is a vast amount of blind trust in banks in the average population; looks like acting all serious-business and putting on a suit AND being able to control or at least have an important stake in a lot of major aspects of working-class citizens' lives (tight budgets, making ends meet) makes for a powerful combination.
I apologize if I misunderstand your claim (or if you are not actually supporting this claim), "that banks give out let's say ~ten times as much as they actually have". I've heard others make the claim that banks loan out more than they have in deposits, and I'm responding to that claim.
This is not true. As far as I can tell, this misconception stems from the correct notion that banking (fractional reserve banking) expands the money supply. This is sometimes extrapolated to "banks create money" and then to "banks loan out more money than they have".
Banks do not "give out" "~ten times" their deposits. They give out (for sufficiently large banks) 90% of their deposits [1] in exchange for obligations to repay. The money supply expansion that results from this (Alan deposits $100, bank loans $90 of Alan's money to Bob who gives it to Charlie who deposits it in a bank, which loans out $81 of Charlie's money to Dan, etc.) is the ten time expansion that you're probably alluding to; but the bank can't know that Charlie's money is money that it lent to Bob.
The banks are not doing anything wrong here; there's a larger argument about the societal benefits of banking, and whether banks should be restricted in how they give out their money, but starting with distorted facts makes these discussions very confusing.
I was sort-of witness to a shouting match between a well educated son and his hard-working working-class rest of the family over the fact that banks give out let's say ~ten times as much as they actually have. They called him stupid, outrageous and how could any company possibly do this and they can certainly not run their small wood-shops and small companies like that so how should a bank be able to do that? Mind you, these are average good natured law abiding folks, the kind that certainly is the majority of the population.
This goes to show that there certainly is a vast amount of blind trust in banks in the average population; looks like acting all serious-business and putting on a suit AND being able to control or at least have an important stake in a lot of major aspects of working-class citizens' lives (tight budgets, making ends meet) makes for a powerful combination.