June 10, 2013 § Leave a comment
This design maintains the mutual elements of the UK banking system – our common cash machine system and payments infrastructure as well as the ‘free banking’ transaction system, it frees the lenders from a crippling cost obligation and it ensures that everybody can rely on ‘cash in the bank’ being there – regardless of the turmoil in the lending institutions.
The one casualty is interest on deposits. To have interest on deposits in a private system there has to be income from somewhere else to pay that interest. Therefore in this system it becomes a line item of government spending – likely via interest bearing accounts for individuals at National Savings. Paying interest on deposits in this way is then really just the same as paying coupons on Gilts. Gilts, of course, would cease to be issued under any rational government. read more