- Capitalism and Alternatives -

You misanalyze the realized returns through investment.

Posted by: David ( USA ) on October 17, 1999 at 17:47:44:

In Reply to: Please help me perfect The 'Box Analogy' posted by andy on October 16, 1999 at 12:15:02:

You misanalyze the realized returns through investment. When you go and put your money in a bank you are essentially allowing them to use your money to finance companies and individuals. The companies and individuals borrow the money and pay interest in relation to the amount and span of time. When (and if) they pay back their loan with interest. The realized gains on the interest are then used to pay you interest on the amount you put into the bank.
You are being paid for the risk you are taking. Since the risk is really not all that great (when was the last time you went to the bank and they didn't have any money for you?) the interest paid is not all that significant. If you were to put a greater amount of money at stake than naturally I am sure you would expect to recieve more compensation for the risk you are taking.
I honestly do not see why socialists are opposed to the concept of banks loaning money. I mean, if the banks didn't loan money the only people able to finance a company start-up would be the rich. At least with banks you can have some worker who makes "slave wages" borrow money to open up a diner or something. Of course, when that happens you wouldn't have much to bitch about (except maybe regulations) which would take all the fun out of being socialist.

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