Power, Water and Mail are provided by Utilities and Banking is no different - the business of banking is surprisingly simple
However, usually the politicians with free hands "guide" this utility, called banking, quickly to private hands. This is the reason to all financial misery today in the world. It has never worked and will never work as this business is easy and boring and to have some challenges new schemes are born inside the banks. Using these stealing peoples money is so easy that sooner or later ethics is gone.The real businesses are challenging and not so simple like this one as explained below.
The Essence of Banking
First we explain the old fashioned banking and how it works everywhere still today. Note that banking is the second oldest profession:
A public central bank handles all local government banking and taxes in the area its domain. It also makes money available for all private banks at competitive rates that have license to operate on the area. North Dakota has such a central bank that has operated now almost 100 years. It has been always profitable and returns the profits to the people of North Dakota. it's rates both for depositors and borrowers beat everything available in the rest of the USA. It finances all utility type projects in North Dakota providing considerable benefits to its people.
The bamk can operate also on a very small area like one village in Germany has proven. One family bank following the original banking principles can handle all banking needs for the people in this village. This bank has one requirement for its depositors and borrowers they all must live within 10 kilometers from the bank.
As a general example of old fashion banking, the bank pays all depositors say 3% for their deposits and charges all borrowers double of that, say 6%, for their loans and keeps the difference for operating costs and bad loan reserve.
That is in principle all what real banking is and has been since its beginning or some 10,000 years. This kind of operation has no inflationary nor deflationary impact to the surrounding economy.
Below is a more challenging way to do banking as this puts all societies as horses in front of the carriages and force them to move faster and faster until they collapse out of exhaustion. This is the current private banking system as is in the USA and the Europe:
Bank pays the depositors 1%+ or so for their deposit and charges the borrowers anything between 6% and 29.9% for loans and keeps the difference for costs and as bad loan reserves.
The private central banks like FED require all banks in their domain to have a certain percentage of "cash" reserves to "allow" them to operate as independent banks. The problem arises when these central banks change the reserve requirements - as they do this from time (the cycle is about 5 years) to time to maximize their own profits (officially: to secure price stability and growth in the country).
When it reduces the reserve requirement it "prints" money by allowing all banks inside its domain to get free money and lend it further to borrowers at low interest rates and liberal terms - lending say 125% of the value of collateral and minimal checking of the borrowers credit worthiness. This process was used to create the US housing bubble and put the well planned current financial crisis in motion.
The real money maker for the banks has always been industrial and institutional refinancing, the interest rates are not that important for them. Refinancing of the loans must be made every 3-5 years at rates guided by the central bank with lender bank's "frosting" on the top together with a multitude of associated or related financing fees.
The items 2 and 4 together are the reason why we have deflation right now in the USA and FED cannot even create inflation even if they tried as the Teaparty activity in Congress is synchronized with this all. The Banks are now "replenishing" their "reserves". Earlier they were lending money out left and right to get up to 50-90 times of their "reserves" to borrowers and with new rules they must increase their "cash reserves" in tight schedule to lower their loan multiplier to be only 9-10 times of these reserves. If they do not get there during central bank's "grace" time they are merged with those FED consider to be stronger banks (often the owners of the FED).
Regardless that some areas in the USA don't see any signs of financial problems some do. It is not business as usual any more. As said in item 4 the businesses must refinance and today with new requirement in their cash reserves the banks cannot lend and the loans are called back. When this happens the underlying businesses usually get into bankruptcy if their owners don't find the money to pay off the loans. With that the jobs are gone and the invested capital gets destroyed. Now more unemployed people lose their houses, cars and everything they own if they cannot pay their loans according to their agreements and even more capital loses value.
The central banks can game the whole countries like Ireland, Greece, Portugal, Italy, Spain,..., with benefits fallin into the hands of those with cash to use or who can get loans from banks supported by the central banks. This is the way the city of Detroit was put to bankruptcy. We are surprised that people cannot figure this out and have not taken the issue to their hands and either fired their elected representatives or forced them to solve this issue and do it fast.
To make themselves unbreakable - too big to fail - the largest of the private banks have created their own unregulated casino based on derivatives. This casino has now face value of about US$ 700 trillion and everything of it is on the game board, manipulated with supercomputers programmed to steal money from every outsider that enters the game. This is the tool that was used to take our retirement money out from our pension funds and stock markets during and after the September 15th, 2008 market crash. In comparison the size of the US Economy is a miniscule US$16 trillion and the combined world economy is no more than US$ 60 trillion. This casino has now added derivatives that trade on derivatives and who knows what else gibberish is now there. A highly skilled real world economist asked from one insider of these extras and got the reply: "we sell any financial product that somebody wants to buy". The economist then stated the above extras make no sense nor are they logical - and got the reply: "you are right, but there is a market for them"..Original derivatives were developed to stabilize agricultural and commodity prices for people living in forever growing population centers in Europe.
The kings of the Europe had learned early on what to do with criminally acting banking systems the Templars had built and their banking system ended abruptly on or around October 13th, 1307 when King Philip IV of France joined forces with Pope Clement V. They together dismantled the Templar banking empire through brutal simultaneous murdering of every Templar they could locate in Europe.
The goal of the King Philip IV and the Vatican was to eliminate this excessively abusive banking system from expanding their power by taking over all the properties of the nobility and thraetening even them. This effort was risky as Templars together were at the time already a major military force.
Ending the Templars' Banking Empire did not mean the "End of the World" like our current Banking Empires claim.
Also Both Edward III and His son Edward IV of UK did the only right thing, they refused to pay the bankers their money from whom they had borrowed to wage wars. The real blow for bankers came during the War of Roses and Edward IV.
The Italian Medicis knew the likely end game for their profitable private banking dynasty if they would overreach too quickly. They never used their banking dynasty as a tool to openly force the politicians of the time to do anything and even less to use this type of poweragainst the Kings or their advisers.
That was totally opposite to what the current banksters have already started doing on a massive scale. Perhaps they already believe they have won and become invinciple with the support of the US political system and its military force. They must be preparing for something big as the US Defence Minister Mr. Hagel just ordered enough ammunition sufficient to Iraq size wars for the next 20 years. And ammunitions also do have an expiration date.
FED, JPM, BA,, Citi, Goldman Sachs, Morgan Stanley & others for sure know the histroy and the dangers but refuse to accept that their hay days are over with their US$ 700 trillion+ derivatives casino they use to pressure the governments for more and more privileges and freedoms to operate.
Democracies are not fit to protect themselves against the treaths, extortion, bribery and human greed and the forces behind the banksters use all these tools very effectively.
The oligarchy and others hiding like in 1933 in the USA should accept the facts, dismantle the casino and try to negotiate their own freedom following the example of North Dakota banking act in early 1900's. This is the only viable solution for them and their banking empires to avoid the "pitch forks" of the past French Revolution from 1794, two Russian revolutions, Chinese Revolution, from the recent hiostory. Currently they use diversion tactics like the Arab Spring to postpone inevitable - that cannot be postponed much longer. Their time to negotiate is slowly running out!
The large majority of people on the streets of the Europe see and comprehend this all already, but so far only Iceland has reacted the way we all should reactd with the current financial crisis and the derivatives casino. We see what is happening but how to prevent our elected officials from getting "encouraged" for voting differently is still a problem to be solved provided that nothing more radical is surfacing from somewhere.