| Subject: | [socialcredit] Re: The Still Unsolved Problem of the Economy | | Date: | Friday, February 20, 2009 09:25:33 (-0800) | | From: | william_b_ryan <william_b_ryan @.....com>
|
This is not a difficult concept. It flows from the realization that most
transactions are conducted through the transfer of bank deposits, by check or
electronically. Therefore, we think of bank deposits as being "money."
We know that deposits are created when banks extend loans. Deposits are also
created when banks credit deposit accounts for any purpose whatsoever, not just
loans. Banks write checks to their payees, for expenses and dividends, who
deposit them into their bank accounts. These checks are not written against
pre-existing deposits, but represent new deposits created ex nihilo. They are
liabilities that reduce the banks' net worth.
Banks' checks and their resultant deposits are in effect their promissory notes.
When they write checks, banks are doing what any firm would do if their
promissory notes were generally recognized and accepted in trade and commerce.
Ordinary firms go to banks, who accept their promissory notes in exchange for the
banks' promissory notes, in the form of deposits. The bank clearing system is
what makes the competitive market in mass production possible. The money you
receive in your pay voucher can be spent at any store, not just the company
store. The scope and utility of the competitive market in increased
tremendously.
It is reciprocal economic activity. Firms pay a service charge to the banks
that is called "interest." The banks pay the community for the goods and
services being delivered to the banks. That's where the money comes from to pay
interest back to the banks.
---------------------original message--------------------
william_b_ryan@yahoo.com skrev:
> "Because of interest payments, more money must be
repaid to banks than was initially loaned by banks.
Where does this additional money come from? The only
way this additional money comes into existence is when
banks loan ever more and more money over time,
thereby creating the additional money needed to pay
the interest."
> -----------------------------------------------------------
> ------------------------------------------------------------
>
> *Actually, banks create money not only when they
extend loans, but also when they credit deposit
accounts for any purpose whatsoever. Banks credit
deposit accounts when they pay interest, and when
they pay their ordinary business expenses, including
salaries and wages to their employees. They also credit
deposit accounts when they pay dividends to their
stockholders. That's where the additional money comes
from.
>
> *
>
I do not agree with this explanation. It is true that the banks credit deposits
accounts but the debit side must be some income accounts that has been credited
when the same amount of money has been paid from outside the bank. No new money
is created when this is done. The conclusion is that there is still a need for
the bank to increase the amount of lending in order to make more money available
to the borrowers so they could continue to pay the continuously increasing
amounts of interest.
Per Almgren
|
Re: The Still Unso
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