This looks more like a problem of banks giving out bad loans, which definitely happens. And banks that are greedy and give out to many loans without actual collateral behind them should go bancrupt, so the "good" and sustainable banks are the ones left which is a win in my book.
If the bank in your scenario diversivies their creditors then one guy going default wont make the bank go bancrupt. If instead of you buying the 10 bananas it was 10 people buying 1 banana each then one person going default is just part of business.
The other thing is if for some reason the whole Banana industry goes bancrupt and this industry was a critical pillar of the country (lets say exports), then that means the Bank all of a sudden has no more supply of income from interest but a shit ton of bananas.
The Banana industry had to be not profitable to be able to default, right? So that means that maybe the industry got to big and produced way more bananas then the market needed. Now that the industry is bancrupt, banana production stops. This makes the price of bananas go up over time again until we reach profitability.
So even in this worst case scenario that wouldnt mean that the bank ends up with half of what it started with. The market would just sort out an unstustainable industry and the banks would learn to maybe not give out bad loans. The other outcome would be that the public through artificial money creation would pay to keep Banana industry producing more Bananas then anyone needs. And even in this scenario at some point the whol thing would crumble down like a house of cards, but with even worse effects for everyone.
You wouldn't want to live in a country where banks didn't loan out more than they had in collateral. It's the basis for all the growth that brought us to the modern era. We'd all still be farmers without it.
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u/TheHessianHussar 2h ago
This looks more like a problem of banks giving out bad loans, which definitely happens. And banks that are greedy and give out to many loans without actual collateral behind them should go bancrupt, so the "good" and sustainable banks are the ones left which is a win in my book.
If the bank in your scenario diversivies their creditors then one guy going default wont make the bank go bancrupt. If instead of you buying the 10 bananas it was 10 people buying 1 banana each then one person going default is just part of business.
The other thing is if for some reason the whole Banana industry goes bancrupt and this industry was a critical pillar of the country (lets say exports), then that means the Bank all of a sudden has no more supply of income from interest but a shit ton of bananas.
The Banana industry had to be not profitable to be able to default, right? So that means that maybe the industry got to big and produced way more bananas then the market needed. Now that the industry is bancrupt, banana production stops. This makes the price of bananas go up over time again until we reach profitability.
So even in this worst case scenario that wouldnt mean that the bank ends up with half of what it started with. The market would just sort out an unstustainable industry and the banks would learn to maybe not give out bad loans. The other outcome would be that the public through artificial money creation would pay to keep Banana industry producing more Bananas then anyone needs. And even in this scenario at some point the whol thing would crumble down like a house of cards, but with even worse effects for everyone.