Nearly every person on the planet uses the bank, whether it’s withdrawing money from a teller or making an online payment. How often, however, do you stop to think about how banks came about?
To understand why banks came into existence, we have to look back in time and explore the roles money and the bank play in society.
Money makes the world go round
The world is a disproportionate place, where some people are more skilled than others, and some people have skills that are considered more important than those of others. Compare a surgeon’s skills and what it can accomplish, for instance, to those of an artist’s:
The painter, being a human, will have health problems which can be solved by the surgeon. The surgeon might have a love for art, and might want to ask someone to paint his portrait, but the chances that he’ll die if this does not happen is very slim. The picture is different for the painter, whose only hope of life might be the skills of the surgeon. And imagine the only payment the painter had to offer was his painting skills. What happens if the surgeon isn’t interested in this form of payment? Now you have one person with valuable skills and another with skills, but those skills are considered less valuable.
This is where money comes. It was created to erase the inequality between two partners with mismatched skills, or offerings. This is an inequality that has existed for eons and will continue to exist for thousands of years into the future. We’ll never be able to eliminate money, no matter how many people think of it as the root of all evil.
The next step in the evolution of money, one could argue, was deciding where to store the money that was created. The question was answered through the creation of banks – places that serve as storage and distributors of money. Of course banks do much more than this, performing many other functions people require on a daily basis.
When and where did banks start?
The first banks were around in ancient Babylonia and Assyria, about 4 00 years ago. Organisations, like the Knights Templar, grew wealthy from their loans, storage and security. By taking a small cut for services, groups could grow richer and richer. Today, the concept remains the same: provide a service and take a certain percentage of that client’s money for services rendered. The latter, of course, despite the fact that the money belongs to the client.
Let’s look at loans and bonds as modern examples:
If you wish to get a car or house, most people usually don’t immediately have cash on hand to make such a purchase. Banks make bond calculations by assessing various aspects of the client, the transaction, and so on. This means they look at elements like your risk factor and purchase history. The agreement must work more to their benefit than yours, of course, since they are the ones forking out all the money.
Now it’s clear that banks exist to make and exchange money; not just for storage of the world’s money. This allows banks to cater to a natural need and necessary dimension that arises from the natural and necessary existence of money – in whatever form it takes.