The Parasite Theory of Banking

Executive Summary

• Capitalist banking uses the credit of the government and privatizes the gains while not being responsible for losses.

Introduction

While we named the hypothesis, there is literature that discusses parasitism of the banking and finance and insurance sector, the so-called FIRE sector on the normal economy, and skepticism around banking and bankers is repeatedly referred to by many of the politicians listed on this website.

The Parasite Theory of Banking is that banking essentially loans out what is government trust and then enriches itself from something that is a government function. The counter-argument is that banks have an important set of things that they do. However, those things (settlements, clearing, etc..) can also be done by governments. The history of banking is one of the governments attempting to get banks to function in the public interest to cede the power of money creation to them, and banks reneging on their promises to behave responsibly and in the public interest instead focusing on private profit. Michael Hudson is a foremost proponent of the banking and FIRE sector as parasites on the real economy. He notes that the banking sector has convinced the host (the real economy) that banking is more important than the real economy, which is how biological parasites function. We can see this repeatedly with the government bailouts and the Fed putting the focus on making the banks healthy (that is, providing even more subsidies — even after fraudulent behavior is discovered) rather than focusing on the real economy. This is explained in the following quotation

“That’s how the financial sector has taken over the economy. Its lobbyists and academic advocates have persuaded governments and voters that they need to protect banks, and even need to bail them out when they become overly predatory and face collapse. Governments and politicians are persuaded to save banks instead of saving the economy as if the economy can’t function without banks being left in private hands to do whatever they want, free of serious regulation and even from prosecution when they commit fraud. This means saving creditors – the One Percent – not the indebted 99 Percent.” – Michael Hudson / Evonomics