Backward Enterprise Faculty has had a lesson about banking. For that they introduced within the financial system canine Money as a visitor lecturer.
“That is how banks make cash:” defined Money. “Depositors put cash within the financial institution for economists to maintain protected and possibly pay curiosity. The financial institution lends the cash to canine and organizations that want investments. The debtors pay a big curiosity on high of the repayments of the mortgage. The curiosity is the revenue! When you lend some huge cash, there shall be a whole lot of earnings so a financial institution lends as a lot they’ll! Then, economists and enterprise leaders take the earnings and put most of it into their very own financial institution accounts as salaries, bonuses and charges!”
“Will a financial institution lend to canine that may’t repay?” requested a dowdy Newfoundlander.
“Properly,” mirrored Money, “it’s worthwhile to lend, so even questionable canine can often borrow. However right here is the intelligent factor; if too many canine can’t pay again the loans, the federal government take public tax cash and saves the depositors cash! It’s not your threat.”
Hubris concluded the lesson by saying that banking is sweet enterprise.
I’m questioning why are economists paid so properly once they fail so usually and should not accountable? It appears to me that the one protected cash right here is the economists’ earnings.