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Hi John,

I’m not sure I quite follow you here. If you have a bank account and it’s ‘overdrawn’, then the Bank has, in fact, granted you a ‘loan’ to cover the amount by which it’s overdrawn. The alternative would be for the Bank to not honour your cheques, returning them to whomever you’d issued them with a notation that there were’ Non-Sufficient Funds’ in your account to cover them. Leaving you open to a possible criminal charge, in this country, of obtaining goods or services under false pretenses. (And criminal penalties, if it can be proven in Court that you actually did know your account balance was deficient, and had no prior arrangement with the Bank to cover such an eventuality.) Many bank accounts here have an ‘overdraft protection’ feature attached to them. Where the Bank will cover what would normally be NSF cheques up to a certain limit. They are still, in effect, granting you a loan, (and charging you ‘interest’ for it, too, as you’ll find out when you get your statement).

In business, the ‘first’ loan is the ‘easy’ one. The ‘friendly Banker’ lives up to his reputation. But God help you if, without prior arrangement of the possibility, you find you need a ‘second’ loan while any part of the first one is still unliquidated. Here the Banker is apt to be a lot less friendly, for he has to guard against the possibility that you might be using the new funds he’s being asked to advance you to make the payments on the previous ones. Rather than your actually generating some income from whatever entrepreneurial activity you’re saying you’re engaged in.

Regards,

Joe

-----Original Message-----
From: John G Rawson [mailto:johngrawson@hotmail.com]
Sent: March 14, 2006 7:20 PM
To: socialcredit@elistas.com
Subject: RE: [socialcredit] Rent for everyone:- reply to John Rawson

Thanks, Joe. Agreed about their assets.

But in our country, our accounts are simply shown "in the red" (not literally these days, but with the suffix OD) for the amounts we owe. There is no credit shown for the OD granted.

Regards. John R.

From: thomsonhiyu <thomsonhiyu@shaw.ca>
Reply-To: socialcredit@elistas.com
To: socialcredit@elistas.com
Subject: [socialcredit] Rent for everyone:- reply to John Rawson
Date: Tue, 14 Mar 2006 13:16:52 -0800

(John Rawson wrote:- ) Joe, just one caution on bank lending.

In this country, and possibly in Jeff's, banks make no credit entry in the borrower's account and the new money doesn't show up as a deposit until transferred to another account in credit. And of course, if the other account is overdrawn by more than the deposit, it simply reduces the recipient's overdraft without showing up as a deposit at all. The money has a very brief life, the time involving the transfer from one bank to another. It is cancelled out of existence when it meets an equivalent OD.

I just make this point to try to head off a long discussion based on slightly different methods in different economies.

Incidentally, where does your bank show your debt? In a totally different account?.

(Joe replies:- ) I don’t have a Bank balance sheet at hand to see how it’s actually stated, but I would imagine your debt (the bank ‘loan’) would be shown as a type of “Account Receivable” on the books of the bank, and is classified as an ‘Asset’. Same as any other business would classify its ‘accounts receivable’ as part of its ‘Assets’. Your ‘Promissory Note’ is the physical description of that ‘asset’, just like your ‘tractor’ might be the physical description of an ‘asset’ in your books with a ‘money’ figure attached to it. Just like you with your tractor, the Bank or anyone else holding a “promissory note’ (generally held along with some attached collateral ‘security’, like a ‘mortgage’), can ‘sell’ that asset.

The bank’s ‘Loans’ are always considered to be its “Assets”, the corresponding ‘Deposits’ to those ‘Loans’, (and any ‘customer’ deposits, too) are its ‘Liabilities’. As someone once said, “a bank can’t lend it ‘liabilities’ “, and it doesn’t. Whether the Bank collects on its ‘accounts receivable’ (from you), or not, it’s still on the hook for whatever you’ve transferred out of your account as an ‘account payable’ (to others) so long as your account has a positive balance sufficient enough to cover that amount. .
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