Banking for beginners

Trying to help my daughter with odd things towards her forthcoming Junior Cert, we calculated the interest on the little savings account I had persuaded her to take with Bank of Ireland. It was 0.04 per cent over the year. "But that's ridiculous and pointless," she said. "Also, don't they lend money at about 10 or 15 per cent?"

"Not usually that high," I answered, "But yes, if they can get away with it, and it's your money they lend because they don't actually have any."

 "So how do they lend so much money for houses and things when there's not that much in my account?"

 "They lend money they don't have," I explained. "That's the way banking profits started - lending the gold in the back of the safe at interest and hoping that the owner never found out. Nowadays, they have even fewer scruples about inventing money they don't have."

 "Why doesn't the government stop them?" she asked.

 "If the government made the banks behave honestly and responsibly," I answered, "the economy would slow right down and the government doesn't want that because it's the only thing they have to make the politicians look good."

 Now that's education. Next week we shall cover the national hardship to follow the bursting of the phantom-money bubble and the week after that we are going to cover Barton's Law of Politicians - "If you have lots of leeches, the only thing you end up with is less blood."

Dick Barton, Tinahely, Co Wicklow