BANKERS!!!!

Hi, all!

World banking this time. What a palaver! I just want to put money in, and then when I get to a hole in the wall at 3am I want to be able to get out a tenner for a god awful kebab and some soggy chips covered in grease.

Now the whole point about a bank is that loads of people put money in, as long as you all promise not to take all your money out at the same time. When this happens its called a "run". The bank cannot physically hold all that cash, most of it doesn't actually exist, and some of it has gone on wages for the staff and investments to pay the bonuses at Christmas.

What happens then? Well stock prices in the bank start falling, more people withdraw their money, which the bank has to honour, and the stocks fall faster. Two things happen then, one the bank (and its debt) is bought by a bigger bank, or the bank closes its doors for good.
See Northern Rock, this was bought by the UK Government, with our money. We bought the bank with our own money, so we could have our own money back.

This time it was different, this time it was loans. You take a loan out for say 10000 at 10% the bank gives it to you. The bank then says that it has 11000, because that is the amount that you'd pay back. so it can now loan 11000 to someone else.
This can happen forever. But! What if interest rates or cost of living goes up (see Bank of England and oil pricing in the UK) People can no longer afford to pay back the loans, the Banks no longer have the cash, and you get freefall.

The worrying thing is, in order to get out of this hole where we have 2 or 3 major banks crashing out, the UK Government suspended competition law, so the other bigger banks could buy the smaller ones out, to stop this problem. Who caused the issue in the first place? The banks!

I am no expert (as you can see), and this is only very lightly described as I can't be fagged to find sources and whatnot, but we all need to keep an eye on which bank is buying what so we know who's in charge.

Thanks for reading!