Banking Defined – Backward Enterprise College Model – Angel Canine Diary

Backward Enterprise College has had a lesson about banking. For that they introduced within the financial system canine Money as a visitor lecturer.

“That is how banks make cash:” defined Money. “Depositors put cash within the financial institution for economists to maintain protected and perhaps pay curiosity. The financial institution lends the cash to canine and organizations that want investments. The debtors pay a big curiosity on prime of the repayments of the mortgage. The curiosity is the revenue! In case you lend some huge cash, there might be loads of income so a financial institution lends as a lot they’ll! Then, economists and enterprise leaders take the income and put most of it into their very own financial institution accounts as salaries, bonuses and charges!”

“Will a financial institution lend to canine that may’t repay?” requested a dowdy Newfoundlander.

“Effectively,” mirrored Money, “it’s worthwhile to lend, so even questionable canine can normally borrow. However right here is the intelligent factor; if too many canine can’t pay again the loans, the federal government take public tax cash and saves the depositors cash! It’s not your danger.”

Hubris concluded the lesson by saying that banking is sweet enterprise.

I’m questioning why are economists paid so effectively after they fail so usually and aren’t accountable? It appears to me that the one protected cash right here is the economists’ income.