How an Economy Grows and Why It Crashes

69
P U T   I T   I N   T H E   V A U L T
These loan rates then determined 
how much interest the bank could 
pay depositors, who received 
payments on a similarly sliding 
scale. Longer-held deposits lowered 
the bank’s risk of a fi sh shortage. 
Accordingly, higher interest 
payments were offered to those 
willing to leave their fi sh on 
deposit for a while. People who could not commit to 
a longer time frame got lower rates.
Although Goodbank administered the rates, the entire interest 
rate system itself fl uctuated according to market conditions 
that were largely beyond Goodbank’s control. 
Sometimes big gains in productivity made the island’s 
savings swell. When the vault was fi lled to the rafters with 
fi sh, the bank would be 
willing to drop the rates 
charged on loans. That 
was because the losses 
would be easier to bear 
in relative terms, and 
the healthy economy 
that produced the 
savings in the fi rst place 
would provide a fertile 
environment for new 
businesses.

---