| Subject: | [socialcredit] Replying to Bill Ryan | | Date: | Sunday, July 1, 2007 11:37:53 (+0930) | | From: | John Hermann <hermann @............au>
|
At 03:35 AM 1/07/2007, William Ryan wrote:
>John Hermann has repeatedly stated on this and other lists that bank
>deposits are bailments. They are not bailments and haven't been
>bailments for several centuries. That they are not bailments is not
>a matter of controversy, not in fact--nor in the law. Whether they
>should be bailments is another discussion. Those, in America, who
>clamor for one hundred percent reserves, think that they should be
>bailments for deposits of government created money. ...... As to
>bailments, I append the text from an "Austrian economics"
>commentator, who thinks that bank deposits should be bailments, but
>who admits that they are not bailments under the law, and haven't
>been since the early nineteenth century, in the British context. I
>believe the legal citations given are accurate:
>---------------------------------------
The legal profession has rarely been able to get its mind around the
subtleties of banking.
Firstly, deposits in customers' accounts are creditary by nature.
Whenever cash is presented to a bank with a request for a deposit,
upon receipt by the bank that cash ceases to be accounted as part of
the money supply, and is transformed into part of the bank's reserve
stock. In its place the bank inevitably creates a new creditary
deposit in one of the customer's accounts. Thus the money supply
remains unchanged.
If such bank deposits were merely loans, then they would be
susceptible to on-lending. And the only way in which this could be
accommodated would be by reducing the accounts of the banks
depositors accordingly. But this has never happened in the history of
banking. If any bank tried it on, and such deficits was not corrected
by the bank without delay, then undoubtedly the bank would be sued
for theft. And the depositors thus affected would win their case.
In summary, bank deposits are never on-loaned. Banks and other
registered depositories do not need to on-lend deposits, because they
possess the power to create new deposits - a very profitable activity.
>Back to one hundred percent reserves, and what John Hermann means by
>them: He says a system can be one hundred percent reserve if banks
>may borrow reserves from the central bank to cover their deposits,
>which they create through loans, one hundred percent. But the
>central bank is also a bank, which creates credit through loans, as
>does every bank.
Central banks advance 'reserve credit'. Commercial banks advance
'monetary credit'. There is an important difference - reserves are
not part of the money supply.
>Being also the clearing bank for its member banks, there is no need
>for it to back up its credit with reserves.
That is a nonsensical statement. Reserves have never been backed by
other reserves. Nor do they need to be.
> In John Hermann's system, central bank credit, created by a stroke
> of the pen by the central bank, would back the member bank
> deposits, one hundred percent.
Correct.
>The banking system as a whole, including the central bank, in John
>Hermann's system, is very much a fractional reserve system, where
>loans create deposits.
Not so. It is very much a 100% reserve system where commercial bank
loans create deposits. And there is no on-lending of deposits. Much
thought has been directed to the issue of how 100% banking can be
made to work. There are many variations, however I would refer you to
the following section from the web site of William
Hummel: http://wfhummel.cnchost.com/reformplan.html
-- JH
|
Replying to Bill R
Reply to this message