A Day without Banks
A bank is an institution which provides financial services. They collect, loan, exchange and provide a safe place to keep money. Banks date back to Ancient Egypt where livestock and grain were bartered for other goods that the Egyptians needed. According to Murdoch, the Knights Templar “…pretty much invented international banking.” He also refers to them as “…the original ATMs,” subsequently people could take their money, deposit it with the Knights Templar and then withdraw it somewhere else within the civilized world. They also made loans to countries and funded wars, thus, leading to their downfall by Philip IV of France who was in debt to the Knights Templar. Banks have been around for centuries. They can make or break a country and their economy, and individuals can go about business with minimal use of a bank.
Banks are irreplaceable. They have evolved with technology and it is easier than ever to have one’s pay check go directly into one’s own account and to have bills instantly paid. Banks are the safest place for everyone’s money and valuables that are stored in safe deposit boxes. Internet banking and ATMs have made it easier to access accounts, make purchases, and make transfers. Fraud is easier to detect with all these new features that technology has presented to us in the past decade. People no longer have to hide money under mattresses or to worry about whether it was stolen or turned to ashes in a fire. The Federal Deposit Insurance Corporation, or the FDIC, insures depositors “…up to $250,000 from bank mismanagement or other banking problems” as stated by the Federal Reserve Bank of Atlanta.
From an individual stand point, people can live without having a personal bank. As per Choi who stated that “a federal study last year found that about one in four U.S. households skirts banks and relies on services such as check-cashing and payday loans.” A history of bad credit, language barriers, and horrible experiences with previous banks and their fees has had an effect on this trend. Check cashing fees and money orders can add up though out the month when using them. Finding places that will cash a check and issue money orders is also an issue, and if a money order is lost, they are difficult to track and even more so to replace.
Banks are also at the heart of every countries economy. At the moment, the United States economy is hurting because of bank failures that are the result of bad bank loans. The closure of all banks would cause utter chaos. Our economy would cease to exist. We would be right back where we started “where savings are stashed in risky hiding places, credit is only available through expensive pawnshops or loan sharks, and where purchasing a home requires a suitcase full of cash” as stated by International Herald Tribune. Therefore, with all banks closed and non-operational, money would not be accessible. Credit and debit cards would be useless. The economy would come to a screeching halt with no loans being lent, money being spent, or money being made. Supply and demand are what our economy is all about, but when there are no means to support the demand, there is no supply.
A bank failure is defined by the FDIC as “…the closing of a bank by a federal or state banking regulatory agency... when it is unable to meet its obligations to depositors and others.” If this were to happen across the country, essentially our country would be bankrupt. The paper and ink the dollar bill is printed on would be worth more than the actual currency amount. Loans would not be able to be given out to customers.
The government puts regulations on banks not only to prevent the institute and its employees from committing fraud, but also to prevent bank failures and acts of terrorists. These regulations are in place to protect the consumer. They also use the regulations to track money, which if suspicious, can lead authorities to terrorist or ordinary criminals, such as drug dealers, tax evaders, or murderers for hire. Especially after the terror attacks of September 11th, the government insists that the bank verify the identity of each and every customer. The U.S. Treasury is responsible for currency and coinage; managing federal finances; supervising national banks and thrift institutions; investigating and prosecuting tax evaders, counterfeiters, and forgers; and advising on domestic and international financial, monetary, economic, trade and tax policy. There are several offices under the U.S. Treasury that banks must comply with avoid fines. The Secret Service, not only protects the president, but also plays a role in banking. The United States Secret Service “…is responsible for maintaining the integrity of the nation's financial infrastructure and payment systems.” This includes counterfeit currency and financial crimes, example: identity theft, forgery, and money laundering. The Internal Revenue Service, or IRS, is “…a partner in the U.S. National Money Laundering Strategy.” The IRS try to identify and thwart money laundering that may benefit criminals who are attempting to evade taxes, finance terrorism, or any other illegal activity. The Federal Reserve “…makes the key decisions affecting the cost and availability of money and credit in the economy.” The Federal Reserve Board members are the people who determine the interest rates on borrowed money. The members lower the interest rate to encourage spending and raise it to slow spending down. They also regulate banks on the amount of assets they must keep on hand and how much money in loans a bank can give out.
In 2002, the country of Argentina went bankrupt. Thomas Catan reported that “…bank depositors are facing the prospect of having their life savings transformed into bonds for the second time in 12 years.” With their economy in shambles, Argentina’s spending was out of control. The Reality of Country Bankruptcy website stated “…that the government has frozen bank accounts and have limited the maximum amount that an account holder can withdraw in a day or week.” The Argentinian’s had ran to their financial institutions and withdrew all the funds they could before the declared bankruptcy, this in turn made the economy suffer all the more. Reducing the money that a bank holds this reduces the amount of money to make loans and the potential money from the loans are not being spent in the economy to keep it moving. Therefore, there is an economy where the majority of the population is holding on to what money they have and this eliminates demand which stifles supply. When there is an abundant of supply, there is no need to produce any more since demand is down and that is when jobs are cut.
Throughout history, civilization has depended on banks to survive. Without them, people would still be depending on the bartering system to meet their needs and support their families. Technology as we know it would not have been able to make the advances they have made. Loans would not be given; credit would be totally an unknown. Supply and demand are very sensitive things and if they are not being kept at a steady rate everything just falls apart. Without banks to keep the money moving easily so supply and demand can be stable, this country does not have a leg to stand on.
“A Guide to Your First Bank Account.” Federal Reserve Bank of Atlanta. Web. 18 Mar. 2011.
"Bank Secrecy Act." Internal Revenue Service. 3 Jan. 2011. Web. 22 Mar. 2011.
Catan, Thomas. "Argentine strikes raise fears of renewed rioting DUHALDE GOVERNMENT BANK DEPOSITORS FACE SAVINGS BEING CHANGED INTO BONDS. " The Financial Times. (April 22, 2002): 10. General OneFile. Gale. Motlow State Community College. 21 Mar. 2011
Choi, Candice. "Life without a Bank: Fees and Confusion Galore - Business - Your Retirement - Personal Finance - Msnbc.com." Breaking News, Weather, Business, Health, Entertainment, Sports, Politics, Travel, Science, Technology, Local, US & World News - Msnbc.com. 4 Oct. 2010. Web. 18 Mar. 2011.
“Criminal Investigations." United States Secret Service. 2010. Web. 21 Mar. 2011.
“Duties & Functions of the U.S. Department of the Treasury." U.S. Department of the Treasury. 22 Feb. 2011. Web. 21 Mar. 2011.
“FROM MATTRESSES TO MORTGAGES.” International Herald Tribune. 27 Feb. 2006. Web. 16 Mar. 2011.
“MONKS ON A MISSION; Never mind the Da Vinci Code - we should be grateful to the Knights Templar for inventing international banking, writes Adrian Murdoch. " The Herald (Glasgow, Scotland). (Feb 18, 2005): 6. Custom Newspapers. Gale. Motlow State Community College. 16 Mar. 2011.
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