by Richard Daughty
The Mogambo Guru Blog
In the old days, you would gradually provide for your retirement by saving money, either stashing cash under the floorboards or at a bank. By the term “in old days”, I actually DO mean all the way back to dinosaurs, who did NOT save for their retirements (which you can easily prove for yourself by examining the fossil record), and they all died penniless. Let that be a lesson to you.
Anyway, the bank at which you saved towards retirement would pay you somepiddly rate of interest that at least offset the rate of inflation, and little by little your little stash grew and grew, until one day it was a mighty oak tree, majestically spreading its strong, leafy branches to the beaconing sky and… Oops. Sorry. I don’t know where that came from.
Anyway, the bank would use your measly deposit to loan ten times as much to creditworthy people and businesses, charging them a slightly higher interest rate. The bank’s profit was the spread between interest paid by the bank to the depositor, and the monies paid to the bank by the borrower.