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Subject:Re: [socialcredit] the reality?
Date:Monday, November 15, 2004  22:54:50 (+1030)
From:John Hermann <hermann @............au>

An excellent rebuttal and summary of the situation
regarding deposits.  However I don't recall seeing
the original item in any previous posting on this list.
JAH
---

At 03:05 AM 15/11/2004 -0800, you wrote:
"...the reality is that they are loaning money out
that they have collected through deposits."
----------------------------
--------------------------
That is not the reality.  This falsely assumes there
is some quasi-physical quantifiable thing called
"money" that is beyond the control of the banks.  In
the old days that would have presumably been gold.  I
say presumably because that was never the reality but
merely the smokescreen.  The reality is that banks
when receiving deposits are receiving transfers of
bank credit from other banks through the rules of
double entry accounting.  If an individual bank
receives a deposit in the amount of X from a
customer, it is incurring a liability to its
depositor in the amount of X.  It is receiving an
offsetting asset in the amount of X which represents
the liability of some other bank in the amount of X. 
In a modern central banking system that other bank is
generally the central bank.  But - and this is an
important distinction - when the individual bank
grants a loan in the amount of Y, it is creating a
liability in the amount of Y to the credit of some
customer's deposit account in the bank subject to
transfer to other banks during transactions in trade
and commerce.  The offsetting asset the bank receives
in the amount of Y is in the form of a promissory
note or negotiable security of some type.  So it is
emphatically not true that banks are loaning out
money they have collected through deposits.  The
operative theorem is:  Loans create deposits; the
repayment of loans cancel deposits.  In the modern
system deposits function as money which the banks
themselves create.  It is a service providing real
value to the community for which they should be
reasonably compensated.


----original message----
I would like to point out that the bank is not making
all that money on interest simply for pressing a few
keys on a computer.  That may be all that physically
takes place, but the reality is that they are loaning
money out that they have collected through deposits. 
Any other interpretation is tinted by
Marxist/communist thought.  The bank is risking its
money by loaning it to someone else.  Even if this
only involves numbers on a computer screen being
transferred from one bank to another, it is still a
contractual commitment -- the modern economy is based
on contracts and computers, so it's easy to poke fun
at it, but banks operate no differently from the way
they did a thousand or even a few thousand years ago.





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