How an Economy Grows and Why it Crashes

Chapter 6. PUT IT IN THE VAULT

As the islander's fish-savings increased, storage became an issue. People traditionally kept fish in their huts, but that proved too inefficient and even dangerous. Fish filchers became a big problem.

And while the islanders would have liked to use their excess savings to grow through loans and investments, most individual savers had neither the time nor the training to judge the merits of business propositions offered to them.

Sensing a solid business opportunity, an islander named Max Goodbank decided to launch a revolutionary service.

After guarding his own fish for years, Max knew there had to be a better way to store his savings. And after seeing so many of his neighbors get hoodwinked by slick fish borrowers, he also knew that most people needed help in deciding how their savings should be lent. With these thoughts in mind, he built a large, climate-controlled facility staffed by the toughest galoots on the island. The new "bank" would safely store the island's collective fish savings and consequently solve the theft problem. But this was just the beginning....

Being a true entrepreneur, Max knew that if all he did was charge a storage fee, his profit ...