Banking 101

http://elainemeinelsupkis.typepad.com/money_matters/2007/12/elaine-meinel-7.html

I am a simple enough person to take seriously, ancient banking rules. And one of the oldest was, you can't lend unless you first attract sufficient savings. To do this, one has to charge enough interest on loans to penalize debtors compared to savers. Savers should be able to prosper more than debtors. Whenever it is the reverse, we get inflation, hyper-spending and a run on the banks when everyone panics because a lot of bankruptcies begin and everything collapses. Indeed, the ONLY reason ANY nation has a 'central bank' is to stop WILD LENDING. The central bank raises rates using various tools in order to protect SAVERS so they don't get ravaged by wild lending bankers! Central banks were not set up to prevent inflation but to prevent WILD LENDING.