You don’t hear much about banks falling over due to the economic slump caused by Corona. That’s because central banks are keeping them liquid. The ECB has doled out more than 1500 Billion Euro in 2020 without anyone noticing. Meanwhile everyone has to continue to pay they rentand mortgage, even if they have zero income because their shop has to close.
Now in Holland we get the second round of bank handouts. How will this work? Well the government considers compensating companies for 100% of their running costs. What are those? Rent and mortgages, loans and credit cost. Who is covered by this? The banks who keep expecting them as if its business as usual. This way you can see banks got secured directly, and now they are going to be secured indirectly.
Now what would the world be like if this support did not exist. If banks really only had their own capital (money) to live of. We separate the money in personal bank accounts, there is no relationship between the credit or mortgage market and those funds, even if it is a popular myth. Besides, personal funds are covered by the govenment.
What if banks could just fail because the payments would cascade all the way back to the ECB (where they get their money) and the ECB did not effectively paused all banks obligations to it by handing out cosmic amounts of cash? Bankers will tell you it would be chaos (because we are all afraid of chaos). Something would definitely happen. Right now we’re all holding our breath under water waiting for a tap on our shoulder to tell us we can come back up again, but what if that tap never came?
If banks did not have any security they would first stop asking for money from whoever owes them, rather than allow people to default on their debts. The 2008 crisis showed that defaulting is not the end of the world, in fact there it was a matter of handing over the keys to a place you could no longer afford anyway. Banks really can wait. Your motrgage probably runs for 30 years so who cares if its 32? This is what should have happened right away. The government and the banks however want you to keep believing that a little girl will go hungry if you don’t pay what they are owed.
If banks themselves where treated like home owners and the ECB would not be super supportive they would fall over. A bankrupt bank can be bought along with its debts. Then you would still owe the money but to someone else. Its a strange thing because actually the bank took a risk in borrowing to you, and they made a wrong call. It is pretty weird they appear completely insured against a bold out of heaven like Covid.
But if the support would not be there now would be a time of great opportunity, home prices would crash, people would be selling them or they would be owned by banks who would be selling them. A lot of other stuff would come on the market to cover costs. This would be an socioeconomic crisis apart from a health crisis. It is already for many people, but NOT for banks! Why not have general mayhem, a general market reset to a level we can all afford?
It appears the only reason banks are exempt from any difficulty is that they are in control and they form an international government of sorts. You can call this a conspiracy theory but we all know right wing parties are lakeys, proposing the most rediculous laws that give advantage to banks. How does this work? Simple : Banks make the money, and we all need it. If we need it more and become more desperate, the last to be against that are the banks.
This is not a general rant against banks by the way, banking, is a usefull practice in large societies. What this has become a rant against is banks being there for banks and nobody else. But we know why that is, we have written about it a lot of times, its because banks are about to lose their power to renewable energy. Bear with me. The below is a simplification for your illumination.
What does money buy you? Stuff. How is stuff made? With machines. What do machines run on? Energy. So what does your money buy when it end up with producers? Energy! Fossil energy mostly, possibly nuclear energy. All fine as long as its not energy YOU can make. Because why would you need money then. Fossil energy is great because it gets destroyed, you need more money to buy more of it. That money flows over bank accounts, through banks, they are the reason for existence of banks. Renewable energy does not cause this money flow (even though it can and banks try everything to get ‘energy markets’ going). Every producer will own its own energy sources in the future, the price of energy will tend to zero across the globe.
Banks need you on a tight leash, you must need money, your renewable projects have to develop slowely, no chaos and market crashes where you try to find new methods to thrive. Just like prince of Saudi Arabia said “we don’t want high oil prices that make people think of alternatives”. Banks version is we don’t want people finding ways around us. Banks do not care about your or your future all the way to the ECB. We think it would be better if they did not have such support.