One of my all-time favorite TV shows is the BBC’s “Chef!” with Lenny Henry. Episode 4 of season 1 (“The Big Cheese”) is almost perfect: unpasteurized Stilton, Rachmaninoff, Albert Roux, and of course amazingly witty repartee.
Lenny Henry plays Gareth Blackstock, Chef de Cuisine of Le Chateau Anglais. The underlying storyline of season 1 is the impending bankruptcy of the restaurant, and the resulting need for the Blackstocks to purchase the restaurant to preserve Gareth’s job.
Of course, the Blackstocks don’t have sufficient capital to buy the restaurant, so they see a loan officer. Since nothing is more important to Gareth than his cooking, he despises having to admit that it is up to a bank to decide whether he should continue as chef. Gareth thus harangues the officer about how he, Gareth, is the important one in the deal since he is the one “at the coal face” while the loan officer merely “lollygags” in his “tilt and swivel.”
After Gareth’s wife calms him down (by threatening divorce), Gareth finally admits that the deal requires two sides: the “unreasonable” side taking risks, and the “reasonable” side that must weigh the risks objectively.
And thus the point of this blog post: at a time when banks are being vilified by all sides – and they do deserve much vilification (LIBOR, mortgage crises, the Great Recession) – they also deserve some credit for controlling inflation. When governments betray the public trust by printing literally trillions of dollars, someone has to assume the reasonable side and weigh the risks. By (finally!) controlling their loan activity, the banks are protecting the dollar from the massive onslaught of government presses.
In an age of automated production, marketing blitzes, and paper money, a market cannot function for long without ever more discerning consumers. The banks are finally playing that role.