Re: [SOCIAL CREDIT] Canada' experiment with social credit

[Victor Bridger]

As I have said repeatedly to the extent that I am beginning to sound like a cracked record. (a) Banks do create credit which when drawn upon and used becomes money. (b) Banks are limited by regulatory authorities to the extent to which they can continue to create credit. (c) The measures of control have altered over the years from an LGS Ratio (Deposits to Loans) to Statutory Reserve Deposit requirements to the Prime Asset Ratio. (d) None of the above negates the argument that banks do create the major portion of the nation's money supply. (e) Banks do not give money they lend it. (f) How banks can increase their lending and maintain their liquidity requirements can be the result of a number of factors. Government deficit spending, the Central Bank's action of buying and selling government securities, a favourable balance of trade, Capital (money) inflow for investments or speculation, or simply by a bank borrowing off shore. (g) The fact remains that bank's do create the major portion of the nation's money supply. In Australia this is currently (it does vary slightly) about 97%   I do not understand why this is continually denied, sidestepped or hidden under a maize of verbiage Vic Bridger ----- Original Message ----- From: Pat Gunning To: [EMAIL PROTECTED] Sent: Saturday, November 15, 2003 12:55 PM Subject: Re: [SOCIAL CREDIT] Canada' experiment with social credit Janos Abel wrote: ...The idea that banks can give money to people, surely just causes inflation. Yes this is the stock answer that is so effective in shutting down any further enquiry. Yet it is important to inquire further, and ask why is it not inflationary when the banks advance the same money in the form of a debt *and* add interest on top? Various details are teased out by this question. One of the most important is the further question, what do banks actually do when they lend? Most of the time, (in more than nine cases out of ten) they simply authorize the borrower to overdraw on an account, i.e. banks lend credit, not cash. In brief *lending* funny(money) can be just as inflationary as giving it. Janos, you seem to be leaving out the fact that a bank may act only as an intermediary. In the U.S., there is a legal limit to how much money a single bank can lend. Ordinarily banks have an incentive to lend up to the limit. Once that limit is reached, they cannot lend any more unless they receive more deposits. If effect, this means that the money created by means of a new loan corresponds to money being destroyed by the calling in of an old loan. For example, suppose that you take your deposit of $100 out of Bank A and put it in bank B. If bank A and bank B have reached the limits of their loans, bank A will have to destroy money by calling in $x worth of loans. Bank B will be allowed to create money by making $x worth of loans. Other things equal, the total money will stay the same. Banks have the power to create and destroy money. But in all of the major capitalist countries, this power is regulated by central banks. The main cause of an increase or decrease in the quantity of deposits at banks in modern capitalist countries is central bank policy. -- Pat Gunning, Feng Chia University, Taiwan; New book: UNDERSTANDING DEMOCRACY http://www.constitution.org/pd/gunning/votehtm/cove&buy.htm Web pages on Praxeological Economics, Democracy, Taiwan, Ludwig von Mises, Austrian Economics, and my University Classes; http://www.constitution.org/pd/gunning/welcome.htm and http://knight.fcu.edu.tw/~gunning/welcome.htm --^^--------------------------------------------------------------- This email was sent to: [EMAIL PROTECTED] EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html --^^---------------------------------------------------------------