You seem to be confusing finance with retail banking.
>Didn't people manage somehow to have a house without something which name suggests it will be paid for the whole life?
Well, for a while people were indentured farmers, then you got people renting tenements and apartments in cities, with some land-grant family farms/homsteads being passed down through inheritance. Mass suburban home ownership is mostly a post-WWII phenomenon, and mostly funded through credit. Though for a time, most people got their mortgages from community credit unions (or similar), those were still financial institutions, just in decentralized cooperative form. Big banks ended up being able to provide better rates through sheer scale.
>A casino, right? On average you lose, but for a price you buy a hedge against unforeseen?
My mother had a brain hemorrhage last week, we paid about $1000 for $500k+ of medical care. The insurance industry works only because insurance companies can invest their giant pool of money and see large enough gains to both cover all their costs and make it worth their while. Insurance premiums aren't sitting around as cash.
Your point?
>that's those same deposits
Nope, it's the interest on those deposits, the core service of the financial services industry. Retirement is entirely predicated on compound interest.
> Same thing. Banks don't "fund" - they "serve". Money aren't theirs, but theirs', banks', depositors.
It's hard to imagine how you could possibly be more wrong. We're not talking about business checking accounts here, we're talking about banks investing in businesses. Banks absolutely do fund businesses, and own (shares in) those businesses in return.
An investment bank owns a business and, in turn, its checking accounts in retail banks.
I don't think you understand banks' roles in philanthropy and education - successful nonprofit institutions like universities draw their operating budgets from interest on their endowments. Were it not possible to park $x billion in account and draw $y million a year in interest for literally forever, many such institutions could not exist.
> I don't think you understand banks' roles in philanthropy and education - successful nonprofit institutions like universities draw their operating budgets from interest on their endowments. Were it not possible to park $x billion in account and draw $y million a year in interest for literally forever, many such institutions could not exist.
They used to own land (and peasants!) themselves or they were funded by someone who did (Church/King/Prince). The former was preferred due to the larger independence and stability it gave them.
Copenhagen University used to own lots of land, for example. So did (do) Oxford and Cambridge.
I thank you - and all other who replied - deeply, but I'm not sure I understand you - or agree with you.
I do assume there are two kinds of banks. One is "retail", or financial services, as I understand it. Gets its money as fees. Another is investment - this one takes risks and reaps rewards, but it's a different kind of organization - somewhat similar to a group of people, who pooled their money and work on a kind of gambling, often reaping rewards, but also taking risks.
Talking about this second group, it's entirely different - for many people who are not members of that group of investors (risk-takers) it's outside of what they deal with. So I'm mostly talking about first group.
For example, my point regarding insurance is that I'm dealing with professionals having different amount of information than I do, and benefiting from that. Theoretically market should bring insurance premiums to some average profit margin. Also theoretically I should be able to earn on average more than I spend on average on insurance, so examples with big expenses are supposed to be exceptions, and on average I'd have more money paying for cases myself. In that sense, insurance premiums are spent (supposed to be, mostly) on cases where insurance events happen.
Next, "those same deposits" - I think the word "principal" is meaningful :) as there won't be interest without principal. So I still think we talk about deposits - together with added relatively modern service of investing, getting some averaged interest and paying some fees to the service which does the investing. Yes, that's the core service. Of retail banks... may be we actually agreeing here?
Next, of course banks invest, that's how they pay that interest. The principal money still aren't theirs - so banks don't "fund" - as in "fund with their own money" - since retail banks by definition don't deal with their own money; instead banks pass those money as credits - or, yes, even to buy shares. The fact that, say, universities takes their budgets from interest shows that service works - but it's not the banks, who "pay" - don't assign the source to them - it's principal, combined with the service (for which banks don't pay, but receive fees), which generates interest. Bank is a sort of an engine which you feed with fuel to get desired outcome (bad analogy, I know), but I think fuel here is more principal (sic), more fundamental than the service.
>Didn't people manage somehow to have a house without something which name suggests it will be paid for the whole life?
Well, for a while people were indentured farmers, then you got people renting tenements and apartments in cities, with some land-grant family farms/homsteads being passed down through inheritance. Mass suburban home ownership is mostly a post-WWII phenomenon, and mostly funded through credit. Though for a time, most people got their mortgages from community credit unions (or similar), those were still financial institutions, just in decentralized cooperative form. Big banks ended up being able to provide better rates through sheer scale.
>A casino, right? On average you lose, but for a price you buy a hedge against unforeseen?
My mother had a brain hemorrhage last week, we paid about $1000 for $500k+ of medical care. The insurance industry works only because insurance companies can invest their giant pool of money and see large enough gains to both cover all their costs and make it worth their while. Insurance premiums aren't sitting around as cash.
Your point?
>that's those same deposits
Nope, it's the interest on those deposits, the core service of the financial services industry. Retirement is entirely predicated on compound interest.
> Same thing. Banks don't "fund" - they "serve". Money aren't theirs, but theirs', banks', depositors.
It's hard to imagine how you could possibly be more wrong. We're not talking about business checking accounts here, we're talking about banks investing in businesses. Banks absolutely do fund businesses, and own (shares in) those businesses in return.
An investment bank owns a business and, in turn, its checking accounts in retail banks.
I don't think you understand banks' roles in philanthropy and education - successful nonprofit institutions like universities draw their operating budgets from interest on their endowments. Were it not possible to park $x billion in account and draw $y million a year in interest for literally forever, many such institutions could not exist.