Deposit insurance allows banking institutions to remain putatively solvent even though they have extended credit beyond what they are able to redeem. But why extend the advantage of deposit insurance to only some institutions? Is it to make a profit only?
The Government, we must assume, don't want every person to have the ability to lend in the manner that official banks are able to, but why? Certainly, it would be very damaging to the purchasing power of the currency. Everyone would be able to purchase a house with their generous mortgages, (the deposits backed by which are) guaranteed by the State. If it is malign for an individual to perpetrate this, why allow banks to do it, in spite of the fee paid? Why should the population suffer from their (inflationary) behaviour merely for the fact that they have paid for a banking license? If banking is good then why not allow everyone to do it, if it is bad then why allow banks to do it for a charge in purchasing the banking license?
Why not let everyone have a banking license? Why restrict deposit insurance to banks? If it is bad for everyone to have the right, then why is that not the case for a limited number? Is evil necessary?
Why does the Government get to choose which people are chosen for a license? Political connections? There is nothing that makes the Government special, so we are left with tyranny of the powerful, abusing the rest.
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