Fundamentally, banking allows money to be materialized based on the promises people make to pay it back with interest. When a loan is made by a bank, it is different than when a loan is made by a private party. That bank loan is brand new money, and it is added to the total banking system. This made possible huge changes in society that we now take for granted.
- Banking made it possible to motivate people by paying them with newly created money instead of enslaving them. This works better. So over centuries it allowed slavery to die back – albeit slowly. Human habits die hard. When credit was not available, as in Germany in the 1930’s, or in the USSR post-revolution, slavery was re-invented to motivate labor. Approximately 25 million people died in slavery in Germany and Russia combined during this period.
- Money could be created by people who were not rulers. This influence cannot be underestimated. It made possible the rise of the merchant and commercial class. Their influence and power grew and grew. The result is today’s world.
- Instead of loyalty and prowess in battle being rewarded, over time, more and more, skill, knowledge and intelligence were rewarded.