Tuesday, August 1, 2017

Catastrophe of bank interest rates – 18

Continues from the previous post -

People who want to justify low interest on loans and commensurate low interest on deposit come with an argument that more production creates more employment. In modern technical world, more products need not increase employment. We see more and more automation in industries and that kills any additional employment. The only activity that surely increases employment is farming activity. They are being looked after by special banks and their working does not need any deposits from ordinary citizens. NABARD is an autonomous body specially created to support farmers. However, if there is more sell then more employment it develops to manage those sells. Moreover, when sells are brisk additional interest they can manage without any difficulty. The problem of interest is highlighted by those borrowers who do not want to pay loans and those defaulters from gambler category. All efforts are made to keep interest rate down for their benefits. Honest industries generally do not raise this issue.
How cashless concept was introduced in America by banks we should see to understand this topic. Does economy benefit by introducing this concept in public? Answer is, not at all. Whether public withdraws money by so-called cashless or by cash does not make any difference for economic development. The origin of this modern method lies in the phenomenon of reduced interest rates on bank loans. When bank lending rates were continuously reduced during and after WW2, due to increasing influence of gamble group banks were frantically in search of some additional income to survive. During that time, INTERNET was developing and telephone system was already developed enough, the idea of credit and debit cards was visualized. This concept was immediately accepted by affluent society as they were spending large sums of money every time they made purchases. To carry that kind of currency was not proper and so this idea of carrying a small credit or debit card was found to be most convenient. Prior to that, they used to carry bank chequebook and would put the value and do the purchase. In that situation, there was chance that the cheque may not realize. To safeguard from cheating by purchaser shoppers would arrange delivery after realization of the cheque. This was often inconvenient and insulting to many buyers who were rich enough; therefore, they preferred this innovation as most reliable for both shopper as well as buyer. Banks would charge a small commission on every transaction. That was additional income to them. The more use of credit cards the more income and in this way, these innovations became popular. This was acceptable for affluent society such as in USA and Europe.

Continues in the next post –
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