FieldBonney737
Today, we seek protection for things we regard to be important. For example with life, I believe most people have life insurance. Similarly, to protect bank stores, governments provide security by implementing deposit insurance.
As much of you know, the use of deposit insurance is to protect your savings in your budget. This helps provide a sense of security to savers and for that reason prevents mass withdrawal of savings (termed bank runs) with countries. With this, the structural integrity of banking in countries is maintained and this stabilize financial markets.
However, the kind intentions of governments to protect savers encourages bankers to take more risks with savers' profit. This is because bankers know that the government will cover their mistakes, since the cash risked is insured by way of the state. History has shown and proven this fact repeatedly. One recent example would be the recent financial crisis within US where banks who lose savers' money in financial games are bailed out by the Federal Reserve's printed profit.
However, it should end up noted that only big banks with political influence are bailed out. For instance, Goldman Sachs, JP Morgan, or anything else. For small banks, they're usually gobbled up by the big banks to achieve market share, leading to oligopolies where they acquire greater power. If your prize of risking savers' funds for big banks are generally bailouts that increase their capital, wouldn't it be reasonable that deposit insurance protect bankers more than savers?
Also, bailouts increase national debt which definitely has to be repaid by higher income taxes. This cause taxpayers to bear the responsibility where the big banks discover the free money to provide people. In the long run, this will increase inflation noticeably. To make it worse, there have been several supply bottlenecks in commodities for years and this will cause imported inflation for importing countries like China and taiwan and US. Both these would add fuel on the fire of inflation, burning the purchasing power associated with money worldwide faster. site reference: deposit insurance uk With policies strongly tilted towards the interests of bankers and inflation, I don't think saving is a viable strategy to create wealth. I believe that will during such periods associated with high expected inflation, investments that can effectively hedge against inflation may be better ways to build wealth as compared to saving. I may be wrong for this but I believe several of you see the gain bankers have over us but will take action to build wealth with methods besides saving.
