All of the backlash against the debits fees are misplaced and AGAIN a lack of understanding of how the system works and what it needs to be healthy. It demonstrates narrow mindedness and short sightedness. Much of the reason we are in the economic perils we are in is because of how banks make money. In order to get to a place where we are free from being a debtor nation, we have to make banks change their product. If we didn't it would be kind of like handicapping and legislating cigaret companies and how they make money crippling their sales and at the same time building billion dollar stadiums and/ or a budget based upon taxes revenue generated by the sales of cigarettes.
What Is A Bank?
I could go into the history of banks and what their purpose was. I could draw out a time line of how they change. In fact, I think I have don it here before. BUT, that would get boring and I would loose you to “Bigfoot sighting” videos on youtube. So let us just ask that question of most of us today.
We have 3 basic types of interaction with banks. We have the one we use the services of. (remember that one.) They accept your checks straight from your employer, make it easy to pay your bills online, validate checks, keep your records, and keep you money safer then under the mattress. Every one of these are services that require payment of more then a few people to accomplish.
This is the bank that give us our mortgages, auto loans, car loans, and school loans. These are the banks that encourage skyrocketing market prices by allowing us to pay a total of $200,000 for a house we bought for $100,000.
These are the banks that hold your credit card. They give you credit cards for purchases you might want to make in the future. This could be a donation to the LOL or an in service escort. The have no concerns about how responsibly your spend that money. Their interest rates are designed to make it so you spend a certain amount of money and then you can't pay them any more then the interest every month.
While these are 3 different types of banks, all 3 banks participate in all three types of banking. The last 2 have been what has caused the demise of our economy. They are the schemes by which we are imprisoned by the time we are out of college. There is way, way, way more money in the last two types of financial servicing. The first one, makes our lives easier. This type of activty should be encouraged in our economy.
Quick Review of What “Loan” and “Credit” Banks Have Done.
I have made this point 100 different ways on this blog. But here is is again. Market prices are set at the level known as “demand”. This price is the highest price a consumer is willing and able to pay for it. Many of us are willing to pay $1000 for an ear splitting, mind blowing, rock experience. However, few of us are able. We simply don't make that much. So in a world devoid of credit, that concert will not sell out for much more then $5 a ticket. But, along comes a “credit bank” who says, you can buy that ticket at whatever cost, we will let you get us to it in small amounts later. SO, off to the ticket window we go. With enough of us doing that, the going rate for every ticket will be pushed up. This is how the housing bubble was created, and this is how the school tuition have gotten so out of hand that they are the next “bubble” to break. Anything that creates a dual value of a product (one for the ticketed price on the market and one that represents the actual amount paid for the thing) is bad for free markets.
So What Is a Banker To Do?
So, if you want banks to stop making everything so artificially expensive, you have to handicap their ability to make money off credit. This is to be called out and demonized as “bad”. Not given bailout money and complain about how they are unable to offer their poison (credit) to people and struggling businesses. Then you must allow them to make money with an actual socially useful product or service. This will require a customer base that pays for that product. Charges for debit card use, charges for writing a check, charges for having a bank account in general are things that we should be celebrating and offering as alternatives to their “credit” junk. We don't want them to be pushers, but we have to offer them an alternative to earning a living. Now what exactly IS a good price for these services? Let the markets straighten that out.
Look people, these are new and anxious concepts, I understand. But if one is to loose weight, they have to change. It is an anxious proposition. But it is one that we must conquer. If we are going to "fix" this economy, bold acceptance of paying for financial services is going to be required.
(This was a quick response to news in a time when I don't have much time. I might revise this one later.)