A financial institution that accepts deposits and channels the money into lending activities
It’s hard to imagine living in a world without banks, isn’t it? After all, where would you keep all those hard-earned pennies? Not under the mattress for a nasty burglar to steal I hope!
Thanks to our money-centric society, and the value everyone places upon money (especially those without it), we need to keep the money safe. So we give it to the nice bank on the high street with the friendly advertising, and open an account. They are all smiles as they go through the simple process of checking how much money you’ve got in other places, how much you earn, if you own your own home, and then the computer sneakily goes off to check your credit rating – which these days is the real measure of who you are. The computer returns an answer after some moments. “Your application has been approved!” the nice employee tell you. “Hooray!” you cheer (on the inside). “But what does that mean?”. “Well it means you get to put your money into this nice bank every month. We will give you a card to access it, and that’s it. Your money will be kept in a big safe for you to access at any time. Thank you for choosing to bank with friendly bank ltd. Goodbye.”
So that’s the basics of banking folks. Earn money, put it somewhere safe. Get it when you need it. The End.
Unfortunately, that’s not what banking is about, is it? You see, if they just kept your money in the bank, how would they earn any money? They wouldn’t be able to pay their rent, heating, or electric bills, and they couldn’t pay the staff. So how do they make money?
Well, they lend it, pure and simple, and for the pleasure of receiving the money, which is actually your money, the borrowers pay back what they owe, plus interest (a fixed charge for borrowing money; usually a percentage of the amount borrowed).
Banks: Shylocks with nice suits
Typically, money lenders or loan sharks (including the famous shylock in shakespeare’s merchant of venice) are always seen as ruthless, merciless, greedy men who lend money at excessive rates of interest, ready to beat you to a pulp for failing to pay the money back on time. Fortunately, the modern banks aren’t like that at all. There is no violence, only men in smart suits, happy to help you with your money problem, politely informing you that you will lose your house if you don’t keep up the repayments; or they will go through the courts to reclaim the money; and if you still can’t pay, the bailiffs will be called to take away all your possessions; but there’s no need to worry about that now, just sign here and the money will be in your account as quick as a flash. You want the money, so you sign, getting steadily more excited as you know you’ll soon be able to buy that new car, new tv, or just pay off another loan! It may well be that you have just signed up for a mortgage which means that soon you’ll have your dream home (oh, and huge debt for the next 25 years).
But no one is forcing us to borrow the money, are they? The banks haven’t got a gun to our heads. We want their money, which actually is everyone else’s money, and they are happy to oblige, at a price. It’s just business for them.
But say you are like me, and after many years of being in a cycle of debt due to not being able to control your consumer impulses, finally realise that borrowing money just to buy more “stuff” is a complete waste of human life, and vow never to borrow money from a bank again, what do you do?
You still have to have a bank account. You can’t escape them. Why? Because you are scared to leave your money at home under the mattress. And anyway, the bank may pay you some interest back on the money you have invested with them.
The question is, what does the bank do with your money once you hand it across the counter? We know they don’t just keep it in the safe! Without boring you with all the details, it basically works like this.
You deposit money. The bank is then able to lend approx ninety percent of that money, whilst ten percent is kept in reserve (a requirement so that people can always access their money. Unless everyone came at the same time that is), the bank charge interest to the borrowers, and pay interest to the savers. Their profit is the difference between the two.
So who borrows money? Let’s start with the individuals shall we? That’s you and me. We borrow large amounts of money to buy houses, and smaller amounts for general items we cannot afford. The loan for a house is called a mortgage (a conditional conveyance of property as security for the repayment of a loan) and the house you have bought is put up as security for the loan to buy it. If you keep up the monthly repayments (which may go up over the period of 25 years if interest rates are raised), you will eventually be the proud “owner” of a pile of bricks which are hopefully worth more than the price you paid! If you don’t keep up the repayments, the bank takes back the house. It’s a no lose situation for them, but it could be for you.
Last week, I logged onto a website that enables you to see your credit rating, and for £5.00, I found out it was neutral – neither good or bad. Armed with that information I set off to the high street to try to open an account. I couldn’t believe I was getting refused, and I didn’t even want to borrow any money.
Whilst I do have a permanent job, I don’t pay any bills (as everything is provided by the college), and I have not had a permanent job or permanent home address for the past eight or nine years. So I am outside of what society considers to be the “norm,” and am now paying the price. Eventually the college wrote a letter stating I was employed and did not have any bills, and one building society has eventually given me a basic account which I can pay money in and take it out.
For the first time in my life I really felt like an outsider, but actually, it felt kind of good to be on the outside. You see, I believe that banking represents one of the great conformities of our time, and if you don’t conform you will be a social outcast, like me. So make sure you have a permanent job, have loads of bills in your name, borrow loads of money, and you can become a valued member of society.
Follow the mortgage dream
Who doesn’t dream of owning their own house, free from the tyranny of private landlords and government housing schemes? Owning your own house is the epitome of individual expression. I am an individual and this is my home. A home I have worked for. That I have chosen. That I have decorated. That I maintain. That I enjoy.
So we get a mortgage, exchange contracts, and we’re in. It’s a square box with a garden (or not if it’s a flat), large or small, furnished with all the modern gadgets, and we love it, because it’s ours. We admire it one more time, then it’s back to work to start paying for it. And work you must. Every day until it is paid, if we can wait that long. Normally the more money we earn and the more the house appreciates, the more we want to move to something bigger, so we get another mortgage and the cycle begins again. If we’re lucky we may have paid it off by the time we retire. I too would like to follow the dream.
I too would like to have the pleasure of a small space with a small garden, but the difference is, I will not borrow money to pay for it. Let me explain why. I do not want to be tied down to one job and one town.
I am not a vagrant, but I do want to explore the world I live in. I want to enjoy the time I have on earth, and I want to contribute to society, but not necessarily in the same place.
The only solution I have found so far is to rent privately in each town or country I am in, but that means having to find work that earns me enough to pay rent. If I can no longer work, I’ll be thrown out, after all, a landlord has bills to pay as well. The question I want to put to you all is how do I, a hard worker, but someone who does not want to help the banking system continue to control the world, find a piece of land to call my own?
I earn approximately £15,000 per year, and the average house price is approx £200,000 around here. Given that I can perhaps save maybe half per year (if I was to take no holidays), and have few bills to pay, it would take me over 26 years to save up for the house, and that’s forgetting that the house would probably go up in value. So even when I had eventually saved enough for the house at 2007 prices, I (a) would no longer have enough in 2033, and (b) I would be one year off retiring age, so I would find it hard to find work.
It’s a trap
So that’s me finished already. At 38 years old there is no chance for me to own my own piece of planet earth, that no one can evict me from, without conforming. In order for me to live peacefully in a nice part of the countryside, I have to conform. I have to get a credit rating. I have to get a mortgage. I have to borrow.
I can hear some of you saying: “Why don’t you just go out and earn the money like other people do? Why do you keep complaining about your lot, when the opportunity is there to make money? You just have to grasp it.”
But earning large sums of money is the domain of commercial organisations, and as I want to do work to benefit humanity, I find myself at odds with their ethics. But that is not the issue here. What we are talking about is the control that banks have on our lives. Having shelter is one of the basic human necessities. Having a mortgage isn’t, but we are encouraged to take one out. This has more to do with economics than making sure that all people have shelter. As usual it’s all about money, and money makes the world go round.
It is essential to have somewhere to sleep, but as the monks know, it isn’t necessary to have a huge house with all the trappings of modern life.
Somewhere clean, calm, and warm is all that is needed. The rest is just superficial. So why can’t I just find a small piece of land somewhere that I could build a modest sustainable dwelling on and grow my vegetables?
Because every piece of this planet is owned by someone; either privately, by the government, or by the king or queen! That’s incredible isn’t it? There is nowhere left to go. We are bound to cities and towns by houses, flats, and employment. The rest of the countryside is owned by farmers and landowners. What do you think about this? Through human organisation and economic development, we have created a world where only a few people are in control. The rest of us must conform or face exclusion.
I am a human being who doesn’t want to borrow money from the banks, and now I am placed in a difficult position, either get a mortgage, start a business that makes a lot of money fast, join a religious or other community, or rent privately.
Are we not a community that shares the land equally?
Before you think I am getting into political ideology here, let me assure you I am not. I am merely suggesting that the way in which land is owned, in the west particularly, only seeks to divide us more, into rich and poor, and the have’s and the have not’s, when really richness or poorness is a state of mind. If you have even the most basic warm shelter that you keep clean, keep yourself well fed and watered, and have basic clothing, that is enough to satisfy the basic human needs. The other needs can be met by development of the mind, and in the development of human relationships. One thing materially wealthy people will never be able to understand is that true wealth will never have anything to do with how much money you have in the bank.
In this age of individual purchasing power, people have been encouraged to forget about the word, community.
We buy land independently, and live independently, surrounding ourselves with gates, fences and walls. “Keep off my property!” people shout. “You are trespassing.” It makes me sad to think that this is how we have developed as a species. Jealously guarding our small piece of land.
The time has come when we the people re-engineer how we live, and break free from forced individualism to reform, not as an ideological community, but one that has the interests of others at heart. It is interesting to see the amish people in america, who originally came from holland, still living the simple way they did hundreds of years ago, refusing to use modern equipment and dressing in simple clothing.
They also help each other immensely with everything. Doing work that benefits others. Working together for a common goal, for the community, a society that cares as much for each other, as they do for themselves. It wouldn’t work in the cities though; most people don’t know who lives next to them let alone help them build a house! In the city, people just keep their heads down and get on with their own lives in as much isolation as possible, but that’s another story.
I know we have not talked about a solution to this mortgage trap, or how we should move forward, but whilst the banks are in charge of all the money there can never be a solution. As I see it, part of the solution involves the dismantling of the cities, and a return to the land, but unfortunately, humans aren’t co-operative enough to be able to do it without fighting over each square of grass. Territory disputes, as you may know, are one of the single biggest causes of war, apart from religion. The one thing we forget, is that we are only on this earth for several years, yet we greedily attach ourselves to the land. But what will we do with it when we are dead? We don’t need it any more, but we try to hang on to it by passing it on to our family, maybe as a way of attempting to keep ourselves alive. Maybe we should think about why we really want it before we possess it.
Part 2: Companies. Where’s your money going?
Banks also invest in companies they believe will make them a profit, and lend money to business start-ups, or businesses who want to expand, for which they charge interest. The only problem is, they are lending your money to companies you do not know. You have no idea what they make, what the impact on the environment is, or what the human rights impact will be. You may think that the textile industry in asia, which employs workers in terrible conditions, sometimes employs child labour, and has people working upwards of 12 hours a day is a disgrace. You may even belong to a campaign group to stop child labour, but all the while you are unwittingly supporting it, because the bank you put your money in is using it to invest in the very company you wish to stop! The banks say they have ethics policies in place, but truthfully how many banks would not lend to companies that promise a good return? So what if the workers live in poor conditions? So what if the companies are using up the earth to make consumer products to keep us addicted? If it makes good business sense then the banks will lend, no question about it. Some of the worst regimes in the world are supported by banks. I can’t list them all here, but you don’t have to look very closely to find out who.
Money finances pain and suffering.
Banks all over the world are responsible for helping create the greedy species that we are, dividing the rich and the poor. They encourage mass consumerism and mass production, all in the name of profit. Landscapes are changed irreparably thanks to the construction of huge buildings and shopping centres, all financed by banks, all paid for with your money.
Do you care? Maybe not. Maybe you have a business that has been financed by the banks. Maybe you have seen your business increase; maybe you are making more money, employing more people. But for what? A bigger house and a bigger mortgage?
Some of you may argue that thanks to banks, the developing world is developing! But all they are going to create is more division, more fear, and more distrust; where more rural communities are split up and sent to work in the modern consumer cities. After all, it’s worked so well for us here in the west! What profiteers will never understand is that development is something that goes on in the body and mind, not in concrete and glass.
Having said that, I am not against money being lent to organisations whose prime objective is to help the human race and the planet, just not financed through the traditional banking system, that’s all.
We need to start creating human organisations where we can put our money. Organisations that are controlled by the investors, who are asked whether they want to put their money into a project or not. I don’t know about you, but I don’t want my money to go into a global pot that could be used for anything, from cutting down forests, to financing armed rebellions. We need to move our money now. Today, to an organisation that is not helping to harm the environment in some faraway country they hope you’ll never know about. We need those in the banking community to stand up and say they will not allow their employers to get away with the harm their strategies have on the planet. But then again, you probably all have mortgages and are afraid to lose your jobs.
If you work for a bank, and your bank funds companies or countries with human rights issues, or funds western companies who manufacture in countries with human rights issues (this includes working conditions), you are as guilty as if you were making the workers toil for eighteen hour days for a pittance. I’m sure you don’t like to hear this, but it’s true. You can’t shut your eyes and ears and say “it’s got nothing to do with me.” It has.
If you work for a commercial bank you and your employer share responsibility for:
The corporate city skyline
Globalised junk food
Slave labour in asia
The consumer society
Greed and poverty
The state of the environment
If you bank with any commercial bank you are responsible too, as am I.
We are all responsible, and that responsibility starts every time we put one pence into these banks. I am currently trying to find out how to run my life without banks, but until then I will be making sure that the building society I bank with does not invest in anything I disagree with! I know that’s not possible, so I ask anyone who is reading this, who knows anything about banking, to please contact me and let me know how we could set up a way to use money to help people, where the money invested stays local to help local people, and to help local projects.
For too long the money has gone into a central pot we have no control over; let’s regain that control. I don’t want to go into company ethics here, but needless to say, if you run a company the only reason you will be taking a loan is to make more money, but for day to day banking, if you and your company care just one small percent about humanity and the planet as a whole, you will be ultra careful where you put that money.
The last borrower is none other than your friendly government. Whenever they don’t have enough money in the bank to fulfil promises, they do what any self-respecting government would do; they borrow, and issue bits of paper with a promise to pay on them. The problem is, they pay interest on the debt, in some cases the government is paying millions, and in others, billions of dollars in interest payments. And who pays for that? Of course, it’s you and me: the taxpayer.
What did they spend the money on? Who knows! But you can be sure they don’t care about the interest payments. They don’t have to individually raise the money, they just get it from us, via our direct and indirect taxes. Our money, wasted in interest payments to banks whose sole objective is to make as much money as is humanly possible without a care in the world, except for the share price; although the government is at fault for borrowing the money in the first place, which means it can’t live within its means.
So there it was; banking in a nutshell. I did not set out to blame one person or organisation for all the world’s problems, as we are all part of the banking system, but we must learn that our actions, although seemingly as harmless as putting in a cheque to a bank, may be causing harm to someone else or the planet on which we live.
Banks and their loans can do both – quickly.