The Big History of Jangguhan Bank
An intuitive explanation of extensive financial theory
A book that reveals the truth about the distorted banking system

"The banking system is a failed system."
Extensive historical evidence and meticulous theoretical analysis,
A book that exposes the contradictions of the modern banking system.

Banks are something we encounter all the time in our daily lives.
How much do we know about banks?
Would you believe me if I told you that the modern banking system, which we consider indispensable, is the cause of countless negative consequences of modern society, such as excessive debt, low growth, polarization, social division, and the climate crisis?
Surprisingly, the author says yes.
Given that banks are essential, and even special, entities in our economy, and that we are mobilizing various policies to rescue them, isn't the author's argument wrong?
Even in 2022, a scholar who theoretically established the special nature of banks and the legitimacy of bank rescue received the Nobel Prize in Economics.


The author bluntly exposes the fundamental contradictions inherent in the modern banking system and the numerous side effects that arise from them.
If you are a reader expecting a book based on shallow conspiracy theories or sentiments that are abundant in the market, you need not read this book.
This book stands in stark contrast to indiscriminate, emotional bank-bashing and criticism without alternatives.
The author's writing boldly breaks our conventional wisdom.
However, the author's work of breaking conventional wisdom is never hasty or reckless.
The author, who has dedicated himself to financial research for many years, meticulously, yet easily, and above all, clearly reveals the contradictions and side effects of the banking system, building on a solid foundation of historical evidence and theoretical analysis.

The banking system is, in a word, a failed one. From BC to the mid-20th century, countless banks were established around the world, but they all ended in bankruptcy.
--- p.14

Almost every country, without exception, is bailing out its banks.
We must ask:
If a company cannot survive on its own and can only survive with the support of third parties, can it really be considered a complete company?
--- p.15

The idea that banks lend out money they receive as deposits is a misunderstanding of the banking system.
The essence of the fractional reserve system is to create deposits out of thin air through lending.
--- p.39

When we invest money somewhere, it means that we have to wait for a certain period of time and, of course, we cannot get the money back during that time.
However, among the numerous financial assets, bank deposits are not like that.
It is a truly peculiar financial asset that is both a source of income and can be immediately converted into cash when needed.
--- p.75

Almost without exception, banking crises preceded credit expansion, i.e., a large increase in lending.
This is also the consistent conclusion of numerous studies on banking crises.
--- p.121

There are countless examples of credit expansion leading to asset bubbles, including the South Sea bubble in England in the early 18th century, the Mississippi bubble in France around the same time, the British railway bubble in the mid-19th century, the stock market bubble in the United States that recurred throughout the late 19th century, and the Great Depression.
--- p.128

Banks in ancient Greece and Rome, and in European cities since the Middle Ages, have faded from the stage of history because they could not overcome the limitations of the fractional reserve system itself.
However, the British gold reserve bank has survived to this day by having the central bank as head of the club.
It is no exaggeration to say that the origin of modern banking was entirely thanks to central banks.
--- p.165

The tight bond between safety nets and anti-competitive regulations was torn apart by the tsunami of deregulation.
The monster called credit inflation, which had been locked in an underground prison for a long time, has been unsealed.
It was clear as day that credit expansion would soon resume and a banking crisis would ensue.
The end of financial repression was the beginning of a banking crisis.
--- p.190

It has been confirmed that the privilege of a safety net is granted more quickly and more broadly as the size of the insolvent bank increases (too big to fail) and the number of banks facing insolvency increases (systemic risk).
Now the path forward for banks is clearly defined.
The strategy was to grow as large as possible while at the same time being as similar as possible to the competitors.
--- p.202

As the big banks aggressively entered the capital market, it became necessary to save the capital market to save the banks.
--- p.211

In today's world where banks are the market, mutual complementarity between banks and markets can no longer be expected.
When banks collapse, the market collapses, and when markets collapse, banks collapse. In other words, when a crisis occurs, the entire financial system collapses.
--- p.214

The essence of overfinancing is the continuous accumulation of loan claims on borrowers who cannot repay, by banks relying on safety nets.
--- p.243

The claim that finance can become an independent growth engine is nothing more than a dreamlike tale chasing a nonexistent financial utopia.
Asymmetric growth in the financial sector, disconnected from the real economy, is nothing more than overfinancing.
--- p.255

The lifeline of a debt-dependent economy is asset prices.
To sustain the debt-dependent economy engendered by excessive financial overload, all economic entities unite to achieve the goal of supporting asset prices.
Asset prices have risen to the level of gods.
--- p.275

In a free market economy, the prices of all goods are determined by market supply and demand.
However, the central bank has decided to directly determine interest rates, the price of money that has a broad impact on all parts of the economy, rather than the price of a single good.
The era has arrived in which the central bank determines interest rates, which should be determined by the total amount of savings existing in society and the will and prospects of numerous economic entities.
--- p.282

The current situation, where the proportion of intangible assets is increasing and their importance is being emphasized, may be something that the debt-dependent economy has created for its own survival.
However, assets that do not generate profits are nothing more than illusions and fantasies, no matter how much you try to explain them.
It is only a matter of time before illusions and fantasies crumble.
--- p.303

In the face of the reality of suddenly rising asset prices, income from sound production activities appears infinitely shabby.
It is no longer possible to maintain one's position and focus on one's original production activities.
The so-called FIRE (Financial Independence, Retire Early) has become the goal of young people.
--- p.304

Unless finance changes first—unless we fundamentally reform the financial sector to end over-financing and a debt-dependent economy—achieving ESG will remain an empty promise.
--- p.309

It is time to acknowledge that the combination of expanding the safety net and adding regulations has failed.
Rather than repeating the emergency measures of adding safety nets and regulations after a crisis has erupted, we must identify the root causes of the crisis.
Instead of wasting resources and energy sending more rescuers downstream, we should go upstream to catch the "guy" who is throwing the kids into the water.
--- p.316

In a world dominated by uncertainty, the government's attempt to become omnipotent by creating a dense set of regulations and thereby regulating the regulated person's every move will only lead to disaster.
In an uncertain world, a somewhat crude but simple approach of setting a few dos and don'ts may be far more effective than issuing a plethora of prescriptions.
--- p.320

Universal principles of law are based on common sense and form a deep empathy within us.
Ultimately, to restore the robustness of the financial system through modularization, we must first examine whether there is anything in the current banking system that we cannot sympathize with, deviates from common sense, or violates universal legal principles.
--- p.327

The fractional reserve system has not stood the test of time because it distorted the very nature of finance.
Finance is essentially about patience.
If you want to invest your money and see results, you will need to wait for a certain period of time.
However, the fractional reserve system eliminated the need for waiting, or patience, in finance by allowing deposits to be withdrawn at any time.
Nevertheless, depositors receive a reward in the form of interest.
--- p.369

Finance, which used to provide equal economic opportunity, has now become the opposite, an obstacle that blocks equal economic opportunity.
As a result, today's finance is hindering economic growth and, furthermore, causing political and social divisions, jeopardizing the democracy that humanity has worked so hard to achieve.

--- p.370