Banks need reserves to handle payments to which their loans may be deposited.
Their deposits are their liabilities. It would be a great type of business that
needs liabilities to back its loans!
John R.
>From: Deus Ex Machina
<vicc@cia.com.au> >Reply-To: socialcredit@elistas.com >To:
socialcredit@elistas.com >Subject: Re: [socialcredit] Reply to Keith Wilde X 2
-continuing. >Date: Wed, 27 Apr 2005 21:33:23 +1000 > >Jessop Sutton
[sutton@kingsley.co.za] wrote: > > On Monday 25 Apr 2005 11:10 am, Trevor Crosbie
wrote (quoting the Minister of > > Finance): > > > Finally, you question the
lawfulness of the lending activities of New > > > Zealand banks. I can assure you
that banks are required to be registered > > > by the Reserve
Bank and their books have to balance. In particular, banks > > > do not create
credit like a central bank. When banks make loans they are > > > lending the
money creditors have deposited with them. > > > I believe this correspondence has
gone as far as it can. Unless you have > > > anything substantially new to add, I
must now consider this matter closed. > > > Yours sincerely > > > Signed by Hon
Dr Michael Cullen > > > Hon Dr Michael Cullen > > > Minister of Finance > >
========================== > > > > I am sorry, but I think we are simply playing
with words. In a sense the > > Minister is correct (and so are most citizens who
are supposed 'not to > > understand') -- a bank does not 'create' (I hate the
term!) any money except > > on the basis of deposits made with it by
clients. If a bank had no > > depositers, it could make no loans; there would be
no multiplier possibility. > > Why is this such a problem? Does this really make
any difference to the > > Social Credit argument? > >the problem is here your
definition of money. in modern society money >is entirely trust. there is no
backing for money, in days gone by >bits of paper where promisory notes for stuff
of real value, so what >the banks where seen to be doing is issuing multiple
promisory notes >on the same backing. this gives the impression of creating money
>if you consider money to be the underlying stuff that has value, like gold. >
>creating credit without a gold backing gives the illusion that money is
created. > >this view is superflous in modern society because there is no backing
>of behind money, other then the trust that money can
be exchanged >for goods and services. where money is deemed worthless without a
>backing then credit effectively invents new money. in modern society >the
collateral behind a loan is the thing of value behind money tha tis >used as a
mortgage. so new money is not created. things that are assets are >simply
monetised. they become the backing behind money. > >Vic >
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