Inflation (to mean higher prices) is a consequence of the State guarantee of bank deposits

The State makes it expensive not to lend your money...

We are "forced" to lend our money to those people who borrow from the organisation which we bank with, otherwise we lose out financially.

http://www.fscs.org.uk/
The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000 (FSMA). Our service is free to consumers.

All money on deposit in a banking institution is loaned out to customers of the bank. Because this practice is protected by the State, it becomes uneconomic to refuse this practice by keeping your money in a full-reserve bank. So then, we all bank with State-banks and our money is loaned out to others. Where normally, we would choose not to lend our money to others, the Government intervenes in the market to make it uneconomic to refuse.

We are effectively being paid by the State to lend our money... to strangers.



Sunday 29 March 2009

Update: Old title: Everyone is being paid by the State to lend to strangers ...They aren't being paid to lend to strangers, they are being paid to (or rather penalised for failing to) place their money in an institution with a banking license (which may then lend the money out). The Government subsidises placing your money on deposit with people who will lend it out. The State subsidises institutions who want to lend your money... The State indemnifies banks against lending (and losing) your money.

Banks can lend your money because the State allows them to... (31st Mar'09)