Banking remains less safe than it could reasonably be. That is a deliberate decision, writes Martin Wolf, Chief Economics Commentator of Financial Times in his article entitled “Banking remains far too undercapitalised for comfort”.
He explains that money is currently being created as a byproduct of banks’ lending activities and that this is inherently risky and that this system is designed to fail. He argues that radical reforms are desirable, but comments that they are currently politically impossible.
Here’s a short extract:
Bank money is least reliable when finance becomes most fragile. Banks cannot deliver what the public wants from money when the public most wants them to do so.
Banks are in better shape, on many fronts, than they were a decade ago. But their balance sheets are still not built to survive a big storm. That was true in 2007. It is still true now. Do not believe otherwise.
You can read the whole article here.