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Discuss the reasons for the existence of banks and consider whether their future existence is assured.
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| Submitted: Thu Jul 11 2002
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Discuss the reasons for the existence of banks and consider whether their future existence is assured. In the first section of this essay I will outline some hypothetical situations to show how the Intermediary role of banks came to fruition and why they were needed. If we imagine an economy without money barter would be the only means of exchange. To convert endowments of goods and labour into a preferred package is an arduous task. Then there would have been a development into a form of commodity money. For example, gold or silver. Due to costs of holding, adding to and maintenance we see the evolution of paper money. Exchange can now take place at different times between parties. When paper money is introduced we see the deadlock between savings and investment break. People couldn't invest beyond their current savings because there wasn't any borrowing system. Money allows savings to occur...
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