BANKS AND CREDIT.

Auckland Star, Volume LXIV, Issue 189, 12 August 1933, Page 8

BANKS AND CREDIT.

I am obliged to Mr. Bleaklev for his letter of the "tli inst., referring to mine of the 2nd just., but there is 110 answer to my inquiry on panes 0, 10 and 11 of the "A, B, C of Douglas Social Credit." In any case, one cannot believe all that Barclay Smith tells- us there, and it is doubtful if Mr. Smith believes it himself for if he did he would not contradict his own statements. Thus on page 10 he tells us: "Banks work on the principle of borrow lon<r and lend short. They like to get the use" of fixed deposits for two years or more, but their own loans to industry are generally of short duration." Quite true, but he omits to add that the banks also get the use of their free deposits to make loans, or, rather, as much of their free deposits as they consider it is safe to lend out. However, on pa<T e 11 he tells us that "banks do not lend deposits," and apparently explains this on pa<re 8, by the statement that "banks create money simply 'by making book entiies, at no more cost than the ink required to write the figures." If this is correct, it calls for an explanation of page 10: "An overdrait is constantly being repaid by the customer to the bank, and re-loaned again." If money can be crcated at the cost of the ink, or at the cost of printing 10/ notes or £100 notes at twopence a dozen, as we are told on page 8, why does the bank need to wait for the overdraft to be repaid before re-loaning the money ? Furthermore, page 15 tells us that "when we pay more money back to a bank, that money is destroyed—it ceases to exist," and this is a direct contradiction of page 10, which makes the true statement that is known (o most people: Far from being destroyed, it is "re-loaned again." However, it is not much use arguing in general terms with a writer who so readily contradicts himself according to the particular point he wants to make. What will be of more practical value is a direct answer to my previous request—a concrete instance where a bank, either in England, Australia or New Zealand, has made a loan' without first receiving the necessary ! funds from its shareholders or its customers. CROESUS.