Tuesday, April 20, 2010

The Banking System

The photo is uncropped except for marginal adjustments. I hardly ever get a clear view of the bank because of parking, but here we are and the AIB branch looks good in black and white. I like the visual interest and the three people all doing different things. I've mentioned the banks before, mainly because of all the recent trouble. Regarding loans in the old times, usury would have been regarded badly depending on who you were and the taking of interest on loans was not especially welcome in some quarters. For Arabs, it was expressly forbidden because the Qu'ran says that God respects commerce but not the taking of interest. In more modern times, it came to mean taking unreasonably high rates of interest that were more or less outside the law. What happened in the immediate present is that excessive risk exacerbated a structural problem outlined by Minsky in what came to be called Minsky's (Financial Instability) Hypothesis. So say some Keynesians anyway. And correct or not, we can all see that the taking of excessive risk does not lead to anything good. Financial risk with depositors' money and sometimes without any deposits in sight could hardly end well.