[lambertsimnel]

Under fractional reserve banking, savings account deposits are lent out, which hopefully does result in productive investment

As I understand it, western retail banks that take deposits are fractional reserve banks, and have to be if they pay interest on deposits; after all, banks don't generate revenue from just looking after your money (unless they charge you for it, perhaps in the form of a negative interest rate)

[vkou]

They are indeed lent out, but mostly in very safe, boring investments, that don't really generate economic activity (mortgages). This is by design, as we generally don't want banks going pear-shaped, and taking people's savings with them!

If your money is used to generate meaningful economic activity, that means you're investing it into something like stocks (Which anyone can do by opening a Schwab, or a Vanguard, or a whomever account) - which will beat inflation, but on the short-and-medium term, are not a safe investment.

[lambertsimnel]

You're substantially right, of course, but to play devil's advocate:

1) the negative real central bank interest rates are a recent anomaly in my country, and above-inflation deposit interest was easy to find before that

2) mortgage lending should indirectly generate meaningful economic activity, in the form of building construction and maintenance

3) buying stocks on the secondary market also only indirectly generates meaningful economic activity - all it does directly is take stocks out of the seller's hands, replacing it with cash - presumably, this causes a chain of trades that lead to the primary market (or possibly to a mortgage)

[rvba]

"In the good times" when dollar was backed by gold, bankers would borrow at 3%, lend at 6% and go to a golf course at 3 o'clock.

The economy is working incorrectly - due to central banks.

Being punished for saving is just insane.

[kasey_junk]

There were major banking panics in the US in 1873, 1884, 1890, 1893, 1899, 1901, 1907 & 1908. All while the US was on a hard gold standard with weak central banks.

That’s of course without considering any of the pre and during depression era panics, where there was a quasi gold standard.

Savings can either be punished by inflation or risk. That’s an immutable financial fact. The only time you aren’t being punished for savings is if you exist in an economy where money can’t be put to productive use and is thus deflationary. Sometimes that’s good for savers but generally it means you are experiencing bad stagnation more broadly in the economy.

[vkou]

> Being punished for saving is just insane.

The economy is a prisoner's dilemma. If everyone saved, we'd all be worse off.

As such, it makes sense to punish defectors.

[lambertsimnel]

Doesn't that depend on what you mean by "if everyone saved"? If everyone saved to the exclusion of entrepreneurial activity, we would indeed all be worse off. However, we'd all be just as badly off if everyone bought stocks to that extent.

On the other hand, if everyone saved instead of buying stocks, wouldn't banks and entrepreneurs have a common interest in making loans replace stocks in funding entrepreneurial activity?

[rvba]

Central banks already "play" on the market. They arent neutral.

So maybe they could stop their inflation policies which screw the little people.

I am not writing about socialism. I am writing that central banks should stop the policies that rob the poor and give money to the rich.

Yes, there were crisises in the past. There are crisises now. And there will be crisises in the future. But in the past, at least the interest rates on savings beat inflation, so common people could build a safety net. Now you are punished for saving. You can play the stocl market casino (which btw. is connected to price of money from central bank...).

Is the central bank for average people, or another corrupted institution made to make the rich even richer?