What with all the attention they have to put into cooperating with the authoritarians they also aren't particularly good at their theoretical purpose, which is pooling people's money and investing it productively. We're watching an ongoing capital crisis in the West where we've been out-invested by nominal communists; it is absurd. The banking system has sticky fingers all over that mess. Then they get political protection through financial crisises where they should be taken out by bankruptcy but the powers that be prioritise having reliable people in what is effectively law enforcement rather then putting good capital managers in charge.
So, y'know. Upside is the banks do a great job of shutting down sex workers and political activism. 10/10 mark for reporting what everyone is doing to law enforcement. Downside is that turns out to be a big distraction from all the wealth creation banking can enable.
Investment funds of all sorts manage the world's money. Your retail bank might originate mortgages, but it almost certainly sells them on.
The Fed doesn't want to see an overnight switch to narrow banking, where banks sell you checking accounts and money transmission services and never make decisions about investing the deposits. It has declined to approve banks that would do that. But it seems OK with presiding over a managed decline of banking into that state.
The main business of banking is actually leveraging the capital of their owners (shareholders) to lend. Deposits are not the main game, and are there for two reasons - firstly that lending produces deposits, so banks may as well be able to hold deposits just for that reason, but also because deposit inflows create the liquidity banks need to lever up their capital. This is the real reason why banks pay interest on deposits - to encourage people to transfer money in and not transfer as much out. Actually just having the deposits sitting there doesn’t do much for the bank, so the bank more wants you to transfer money in to increase your balance and not just hold it.
> Retail banks actually don’t ‘pool people’s money and invest it’
However, the phrase "invest it" makes it sounds like they are gambling the money on speculative investments! There are very strict rules about what securities (classes and ratings) are allowed as investments.
>deposit inflows create the liquidity banks need to lever up their capital
Aren't these basically the same thing? There's complicated capital structure around how much tier 1 capital banks have to hold, and what deposits have to be backed by, but at the end of the day banks are taking money from depositors and investors, and using it to buy assets. More importantly if you deposit a dollar, that's not sitting around in a vault somewhere, it's used to buy treasuries or whatever. Most people would characterize that as "pool people’s money and invest it".
In this case though I said banking system, not retail banking system and I think the fairest reading given the ambiguity is just to treat it as "pool people's wealth" and shift to talking about the real economy.
I personally would lay far more of the blame at the feet of the slow-but-steady disassembly of a proper tax code which has rendered our Government all but unable to function from a fiscal perspective since the Reagan years. I'm curious if you would feel the banks are more responsible, and if so, how?
Everything I've read on the subject over the years pretty squarely lays it at the austerity movements that have utterly crippled most western countries but none more thoroughly than the United States, where the notion seemingly of spending any public money on anything no matter how needed that isn't Defense spending is Communist, alongside of course the general (and consequential of that) transfer of wealth from the working class to the extremely wealthy who dodge more taxes than ever before, perhaps in all of history of the practice of collecting taxes.
Federal Receipts as a Percent of GDP:
https://fred.stlouisfed.org/series/FYFRGDA188S
There is not any kind of material long-term discontinuity initiated in the Reagan years. It has been approximately flat since the end of WWII, which implies a growth in real government revenue per capita consistent with the growth in real GDP per capita.
This chart is only federal receipts, not state; the total of the two in the US is ~30%. Countries that have taxpayer-funded healthcare systems have a higher total on paper because the cost of the healthcare system is then in the accounting as government revenue rather than private insurance premiums, not because they're doing significantly more non-healthcare government spending. In reality the US government spends more on non-healthcare government expenditures than most other countries because it runs such large deficits.
> Everything I've read on the subject over the years pretty squarely lays it at the austerity movements that have utterly crippled most western countries but none more thoroughly than the United States, where the notion seemingly of spending any public money on anything no matter how needed that isn't Defense spending is Communist
What's really going on here is that the government is already extracting approximately the amount of money from the economy that maximizes medium-term government revenue given the trade off between revenue extraction and GDP growth.
But the government is thoroughly captured by lobbyists, so every dollar the government spends on something that actually benefits the population is a dollar that isn't going to a well-connected government contractor or a union that wants a wasteful boondoggle and can shift enough votes for a representative in a vulnerable district that the party will sell out the general public to secure that seat, or to vote buying from retirees that has now reached the point that US Government spending on retirement benefits consumes more than half of all federal receipts and goes disproportionately to affluent retirees.
Which makes it hard to pass useful programs because you have to fight the incumbents for the money.
> alongside of course the general (and consequential of that) transfer of wealth from the working class to the extremely wealthy who dodge more taxes than ever before, perhaps in all of history of the practice of collecting taxes.
This is also a mischaracterization of the change that happened during the Reagan years.
If you look at nominal tax rates, on paper they went down under Reagan, but then you look at federal receipts and in 1979 they were 17.6% of GDP whereas in 1989 they were... 17.6% of GDP. As opposed to today, where over the last five years it has been in the range of 16% to 18.8%. Or the 1960s and 70s where it was in the range of, well, ~16% to ~18% of GDP. It really hasn't materially changed at all.
What changed under Reagan is that prior to that, tax avoidance was much easier. People were deducting everything. When they lowered the nominal tax rates, they also closed so many loopholes that the effect of the rate reduction on government revenue was zero. Which is to say, the amount of tax dodging is much lower now than it was historically.
If I still had a fortune file, this would go in it!
Or consider sending a man to the Moon. Soviet Union eventually abandoned own efforts and was able to create a rocket with similar capabilities as Saturn V only in 1986.
Or consider that the best semiconductor production process comes from a Taiwanese company followed by South Corea and US. China is still not able to catch up despite all the efforts.
Or consider high speed trains. It was Japan and Europe that developed comprehensive network first, not China. And Soviet Union and later Russia never came close to implementing anything like that.
The point is dictators fail most often by ignoring things they consider small and not letting someone else take care of it.
The space race first astronaut (cosmonaut) was Yuri Gagarin, and Laika. Stating the space race was lost by Soviet Union is myopic at best. The Soviet Union defaulted due to being unable to compete, the costly Afghan War, and the inefficient system. But nowadays, how relevant are NASA and BMW ?
The liquidators of Chernobyl [1], to name another example. Another feat is winning the Great War. Shenzhen is also one of a kind. Where is the West's Shenzhen? China's equivalent of F-35 (J-10) shot down two Dassault Rafale a couple of days ago.
Far fetched in West? We got corruption, too. We got Boeing, and Trump.
As for train system, Russia's main transportation is via train and it is robust, but slow. That happens when your country is such a vast amount of land, without solid (direct) sea connections.
But in general, it is a myth, albeit a different one. It is part of the myth (façade) of the strongmen.
Funny, because in the US right now, if something isn't on this one particular person's radar, then its is ignored. So by this reasoning, the US is a dictatorship right now.