Banks use some of those deposits to make loans to private parties. This is, on the whole, beneficial to society so we want it to continue.
You do not want the government, which is supervised by politicians, picking who gets loans.
You do not want the government, which is supervised by politicians, picking who gets loans.
I don’t think however having the Civil Service running a public bank would be a bad thing though. Career government employees are at the whims of politicians no more than private businesses are, has been my observation, and can when structurally enabled make good sound decisions.
I think having a public option for banking in this light would be positive
Loans create deposits.
Deposits in a bank never go anywhere. All that happens as you “move” money around is the ownership tag changes. And that tends to change the price the bank has to pay on those deposits.
Yes that's why I said there's some value in having private credit creation. In fact, my comment was just lifted from this lecture by Randall Wray where he says precisely what you just said:
https://youtu.be/gI86w6bSmS0?t=445
Although correction to another comment I made: he does specifically say loans should be held by the issuer until maturity.