You open your banking app and the balance looks much as it did before. Then you do the weekly shop and come home with less. If prices rise while the number in your account stands still, you have fewer choices, even though nobody has taken a pound from it.[17]

That deserves more attention than another lecture about cutting back. Banks provide useful services. Those services do not excuse practices that profit from putting customers in difficulty or leave the public carrying the risks.

Why this matters⌗

Your balance tells you how many pounds the bank owes you. It does not tell you how much food, heating or time away from work those pounds will buy. Those are different measures: the amount recorded and its purchasing power.[1][17]

Take a made-up shopping basket. It costs £100, then later costs £120. Your £100 balance has not changed, but it no longer covers that basket. Calling this rising prices is correct. Calling it falling purchasing power is also correct. One describes the shelf; the other describes your situation.[17]

A larger balance can hide the same problem. If your wages rise but the things you need rise faster, the extra currency does not necessarily leave you better off.[17] The banking app is very good at counting. It cannot tell you whether the count still rewards the work you did to earn it.

The main idea⌗

Currency should do more than get through the checkout⌗

Currency here means the pounds, euros or dollars you can spend. Economists count cash and bank deposits as forms of money.[1] The standard for good money in this article is that it should let you put aside some of today’s work without steadily losing what that work can buy.

A means of payment and a dependable way to preserve purchasing power are not the same promise. Savings should be useful later, not merely display the right digits. That is a reasonable standard to judge the system against.

Your bank balance is itself a promise. With £2,000 in the account, the bank owes you £2,000; it is not keeping a separate £2,000 pile of notes labelled with your name. That claim is called a deposit, and you can use it to pay someone else.[1]

A bank loan adds spending money and a debt⌗

Banks do not simply pass your savings to the next borrower. When a bank makes a loan, it normally creates a deposit alongside it.[2]

  1. Alex borrows £1,000. The bank adds £1,000 to his account and records the £1,000 he owes it. There is new spending money, but Alex has also taken on a debt.[2]
  2. Alex pays Jo £1,000 for repairs. The deposit money moves to Jo; the debt stays with Alex. An ordinary payment moves existing money rather than creating another £1,000.[2]
  3. Later, Alex uses money he has earned to repay £100 of the amount borrowed. His debt falls to £900, and that £100 of deposit money is removed. Interest is separate: it is a charge for borrowing, not repayment of the original amount.[2]

Banks still face costs, risks and regulatory limits. Creating a deposit does not give them unlimited resources to meet payments.[2][3] Lending can fund useful work. The ability to create money is not, by itself, proof that a loan is predatory.

When lending becomes predatory⌗

The US Financial Crisis Inquiry Commission was the official inquiry into the financial crash. Its majority report, published in 2011, described mortgage brokers receiving extra fees for placing borrowers in higher-cost loans, often without telling borrowers about those fees. It also described lenders making loans they knew borrowers could not afford, causing losses to investors in mortgage-backed securities: investments backed by those loans.[14]

That gives the criticism something concrete to stand on. A customer seeking a home loan should not have to discover that the person arranging it had a financial incentive to make it more expensive. That is a predatory arrangement: the business gains from a disadvantage it helps create.

The report also found failures in risk management and regulation.[14] The crisis was bigger than one bad practice. But complexity does not excuse selling unaffordable debt or rewarding people for steering customers towards worse terms. Charging for a useful service is one thing; exploiting the customer’s position is another.

In 2008, the public became the backstop⌗

Britain’s rescue of the Royal Bank of Scotland group, later renamed NatWest, shows what public risk can look like. The government provided £45.5 billion in support during 2008 and 2009. It acquired shares, putting public money into the bank rather than simply sending a bill to its existing customers.[15]

On the 30th of May 2025, Britain’s finance ministry, the Treasury, announced its final exit from NatWest. It reported £35 billion returned through share sales and other proceeds. That is about £10.5 billion less than the original support. This comparison is not a complete account of the rescue’s economic costs or benefits.[15]

The public had also financed the intervention. In its 2011 report, the National Audit Office, which scrutinises public spending, explained that additional government borrowing funded bank share purchases and loans. Borrowing carried interest costs, although fees and interest received from the banks could offset them.[21]

A rescue announcement does not make those obligations vanish. The cost can continue while the state waits to sell its investments or recover its loans.[21] That is one way a banking failure reaches into future public finances, beyond the emergency itself.

There were reasons to intervene: protecting depositors and keeping banking functioning were stated aims of the UK support.[21] Letting people suffer to teach a bank a lesson is hardly an attractive alternative. The problem is letting those risks grow until the public is left facing that choice.

Creating money can leave a different bill⌗

Public bank rescues and central-bank money creation are not interchangeable. A government can raise money through borrowing to invest in a bank. Separately, a central bank, the authority responsible for a country’s monetary policy, can create electronic money to support the economy.[2][21]

The Bank of England began quantitative easing, or QE, in March 2009. It created electronic money to buy bonds, which are IOUs used by governments and businesses to borrow. Purchases create central-bank reserves, the money banks use in their accounts at the central bank, and can also create deposits for the sellers.[2][16]

QE aims to lower borrowing costs and encourage spending. The Bank explains that this puts upward pressure on prices, helping it meet its inflation target. It also argues that supporting the economy helped employment and incomes.[16] Increasing prices is therefore part of the intended mechanism, not always an accidental side effect.

If the resulting inflation outruns your income or the return on your savings, you can pay through reduced purchasing power.[17] Your statement need not show a deduction. The loss appears when you try to use the currency later.

But each new pound does not automatically produce a matching price increase. Money creation, spending and prices are connected, not interchangeable quantities.[2][16] Higher energy costs can also push prices up.[20] Blaming every expensive shopping basket on printing money would make a simpler story, but a weaker explanation.

What people usually get wrong⌗

A bailout is not necessarily a gift that the public never recovers. Governments can receive shares, repayments and income. The return matters, as do financing costs and the risk taken while public money is committed.[15][21] An intervention should be judged on those terms, rather than treating its opening headline as its final bill.

Nor does price stability mean prices are supposed to remain unchanged. The Bank of England and European Central Bank target inflation of 2%. The ECB argues that a small positive rate provides a buffer against falling prices and wages, which can make debt harder to repay.[18][19]

That is a policy argument with consequences for savers. You can understand its rationale and still question whether gradual erosion of purchasing power is a satisfactory bargain for people trying to preserve the value of their work.

Dadbot take⌗

Banks should provide useful services, and the people running them should bear responsibility for the risks they choose. Public protection should come with a serious demand to prevent the next avoidable rescue.

The objection starts with the customer: hidden incentives, unaffordable lending and profits made at the customer’s expense. It extends to the public purse when institutions become too important to let fail. A business that benefits from that protection owes the public more than a reassuring slogan about serving communities.

Holding value should be an expectation of good money. If policy accepts some erosion, its defenders should explain the trade-off plainly. People who earn and save the currency deserve to understand the arrangement.

Practical takeaway⌗

Read your balance alongside what it buys. A pay rise, savings interest or a recovered bank investment is only part of the picture; prices and costs determine what is left in real terms.[15][17][21]

When judging the system, ask who gets paid, what incentive they have, and who carries the downside. The answer should be visible before something goes wrong. That is a demand for accountability, not a recommendation to withdraw your savings or buy a supposedly perfect alternative.

Final thought⌗

You work for those numbers. Wanting them to retain their usefulness, and wanting banks to answer for the risks they take, should not be treated as an unreasonable request.

Sources and caveats⌗

Amounts in the shopping and loan examples are illustrative. The predatory-practice judgement and good-money standard are Dadbot’s views. The US inquiry’s majority report includes dissenting reports; the UK rescue is a separate case. Treasury cash recoveries are not a full cost-benefit analysis or the total cost of every bailout. Central-bank sources explain their own policy rationale. This is not personal financial or investment advice.

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