>Who will loan the government tens or hundreds of billions of dollars besides the banks? The [Fed/Treasury/FDIC] has no incentive to prevent banks from loaning customer deposits, because the Treasury needs banks to purchase government bonds
War bonds were bought by people directly. I see no reason why we can't have the same today. God knows the US needs a WWII sized investment in repairing infrastructure.
Individuals purchasing war bonds helped, but didn't pay for WWII.
The war cost a little over $300 billion. $50 billion of that was through individual purchases of War Bonds, the rest came from banks and taxes.
Bankers and merchants have always funded the United States. A representation of Robert Morris, the "financier of the American Revolution" is painted in The Apotheosis of Washington, the fresco decorating the ceiling of the rotunda in the Capitol building where he is shown receiving a bag of gold from the god Mercury. Soldiers and supplies were paid for with "morris notes" which was a proto-currency of the US that was backed by Morris' personal fortune.
Yup. The reasonable UX here is that you as a retail customer get to pick what assets your deposits should go into, and you take the risk. Bank just gets a minor cut for doing the admin work.
And yes, that means if you picked “10y treasuries at 1.56% interest rate” back in 2021, then 80% of your deposit would now be gone. You should have picked “3m treasuries at 0.1% interest rate”.
This whole idea that a bank deposit is some magical asset that you can never lose anything on (other than through inflation) is a leaky abstraction. Like with all leaky abstractions the happy path is great, but when it starts leaking it can get real bad.
So people rather than banks would now be sitting on hundereds of billions of losses. Instead of depressing bank profits those losses would be depressing consumption or home purchases.
Depressing home purchases might well be a good idea. Right now people treat them as investments rather than mere housing, and as a result that market is thrown entirely out of whack.
Indeed, home prices increasing at more than a modest rate is a bad thing for everyone in the long term.
Homes should be investments in the same way that a factory or warehouse is an investment. You buy instead of renting in order to fix the cost of doing business over time, not to speculate on potential future values.
Yes, with "Land Bank" being a big thing now, with people just buying up land and holding it to simply fight inflation, things are just going to spiral out of control one way or another.
The US government already sells billions of dollars worth of various types of bonds to consumers every year. How is what you're proposing any different, and how would you entice more people to buy them than are currently buying T-bills, T-bonds, I-bonds, etc.?
Who is going to buy them? Most US citizens have less than a month's worth of income in their savings account. I'd be surprised if they enough confidence in their own income to tie even half of that up in war bonds.
Many (most?) Americans have no savings account. Not because they are poor but because a savings account is largely an obsolete anachronism. The common tactic of conflating "savings" with "having a savings account" is intentionally misleading.
Per the US government, the median US household has $1000/month they could invest after all ordinary expenses.
Perhaps we'll be forced to accept that we cannot continue to have "endless growth" with a declining workforce. The cost of Labor is going to go up at all levels, and that will mean smaller profits and more inflation until things stabilize and enough of us are incentivized to do productive work.
War bonds were bought by people directly. I see no reason why we can't have the same today. God knows the US needs a WWII sized investment in repairing infrastructure.