Banking system explained – Money and Credit

The international banking system is an enigma.

There are over 30,000 different banks in the world , and they hold incredible amounts of money

The 10 largest banks alone account for about 25 trillion US dollars.

Today, this system may seem very complex, but the first thought was to make life more easier In the eleventh century, Italy was the focal point of European trade.

Merchants from all over the continent met there to exchange their goods.

But there was a problem, too many currencies in circulation.

In Pisa, merchants had to use seven different currencies ,and had to exchange them constantly.

These exchanges, which often took place in the open air, on benches, gave rise to the word “bank”.

From the Italian “banco”, for bench.

The dangers of travel, of counterfeit money, and the difficulty of obtaining a loan ,pushed people to look for new solutions

It was the ideal opportunity for another business model ,Pawnbrokers began to extend credit to businessmen, while Genoese merchants developed cashless payments.

The networks of banks spread all over Europe granted credit ,even to the Church or to European kings.

What about now?

In a word, banks are in the risky business world.

This is an improved on variant of how it works.

People leave their money in the banks, and receive a small amount of interest.

The bank takes that money and lends it out at much higher interest rates.

This is a calculated risk, because some people will not repay their loans.

This process is essential to our economic system ,since it gives resources to individuals to purchase things like houses or industries to develop their business and grow.

Along these lines, banks take the funds that are unused by savers ,and turns them into funds that can be used to do things.

Other sources of revenue for banks include ,savings deposits, credit card, buying and selling of foreign currency, depository business, and cash management.

The main problem with banks today is that , that a considerable lot of them have deserted their conventional job as suppliers of long haul monetary items for momentary additions , which carries much higher risks.

During the financial crisis, most of the major banks adopted financial plans that were ,financial plans that were barely comprehensible and ,made their own business in order to make quick money and earn their executives ,and earn their executives millions in bonuses It was nothing more than a poker game , that damaged the entire economy and societies.

Just like in 2008, when banks like Lehman Brothers extended credit to virtually anyone who wanted to buy a house.

who wanted to buy a house, which put the bank in an exceptionally risky position ,This led to the collapse of real estate in the United States and parts of Europe, causing stock prices to fall ,which led to a global banking crisis , also, one of the biggest monetary emergencies ever.

Hundreds of billions of dollars just evaporated.

Millions of people lost their jobs and a lot of money.

A large portion of the world’s significant banks needed to pay billions in fines

and bankers became the most unreliable profession.

The U.S. government and the European Union had to set up a huge ,rescue plans by buying up the bad stock and stopping the banks from failing.

New regulations were forced into effect to govern the banking sector.

the banks’ emergency funds were strengthened ,to retain shocks in case of another monetary emergency.

But other parts of the new legislation were successfully blocked by the banking lobby.

Today, other models for providing financing are rapidly gaining ground ,such as the new investment banks, which charge an annual fee and do not take commissions on sales, thus ensuring the motivation to act in the best interests of their clients.

Or the Union Loan: a cooperative initiative created in the 19th century ,to circumvent the savages of credit. Basically, they offer similar monetary types of assistance as banks, be that as it may, center around shared worth, instead of benefitting augmentation.

The self-proclaimed goal is to help members create opportunities such as small business start-ups expanding farms, or building family homes, while investing back into the communities.

They are constrained by their individuals, who likewise justly choose the governing body.

Around the world, cooperative credit systems vary widely, ranging from a handful of members

to multi-billion dollar organizations with hundreds of thousands of members.

and hundreds of thousands of members.

The focus on member benefits , impact cooperative lending by the risk they are willing to take.

This explains why cooperative credit, while also affected survived the last financial crisis better than traditional banks.

Not to mention the explosion of cooperative financing in recent years.

In addition to making impressive video games ,platforms have sprung up for people to get funds from a large group of small investors ,

bypassing the bank.

But it works for the industry too.

Many of the new tech companies started on Kickstarter or Indiegogo.

Individual funding allows you to get the satisfaction of being part of something bigger,

and allows you to invest in ideas that people believe in.

The risk spread is so high, that assuming the task comes up short, the harm is restricted.

And last but not least: micro-loans.

Many very small loans, especially in developing countries, which help people escape poverty.

People who were previously unable to access the money they need to start a business , because they are not considered a safe time ,Today, micro-lending has evolved into a multi-billion dollar business.

So the banking system may seem unattractive to you, But the role of the bank to provide funds for people and businesses , is crucial to our society, and is to be done.

Who will do it and how it will be done in the future ,is now up to us to decide.