Archive for the ‘Economy’ Category

HOW TO BUY YOUR OWN HOUSE BY JUST RENTING IT

September 18, 2015

Anyone interested in  setting up a housing co-operative to buy housing to then rent to our members along the lines of the idea below ?

My idea is to simply set up an organisation which would continuously seek crowdfunding  for redeemable shares offering (at present) about 3-4% which would be used to purchase rentable homes. The redeemable shares would enable savers currently offered laughable savings rates by the banks to be able to use this as a safe and reliable method of  savings offering much better returns than banks.

The tenants to which these homes would be rented  would also share in the profit their rent ultimately generates as it pays off the purchase cost. The whole idea is to enable the tenants to build up a sum of money from the profits of the organisation for them to use as a deposit to buy their own home.

If the funds borrowed to 100% fund the purchase are fully repaid by means of charging rent, at the end of a term similar to an average type of mortgage of, say 25 years, then at that point the organisation would own the asset outright. It would obviously then be able to offer a portion of the value of that asset to the tenant.

This portion would accrue from the moment the tenant commences paying rent and would be available to the tenant whenever he leaves  which could be at any time. He does not have to remain any longer than any initial short tenancy.

The tenant would always be paying a ‘market’ rent the same as any other tenant. But he would be getting something back that no other tenant ever does. He will be getting back a portion of the rent he has paid which he can then use as his deposit to go and buy his own home with an ordinary mortgage if he so wishes.

Instead of just paying rent to line a landlord’s pocket, tenants would get something back so their rent would be not completely wasted money dow the drain as it normally is for all tenants.

This model would thus enable a person with no capital whatever to accrue a deposit for their own home purchase, or even use this organisation to end up either a long leaseholder on  low rent if he wished to remain in the property. It could almost be viewed as a means of just turning an ordinary rental into a (different) type of mortgage for the ultimate purchase of a home. A mortgage where no deposit is needed at all. It’s just a rental that eventually just turns into actual home ownership.

It offers a means of home ownership which dis-enfranchises no-one and whereby any tenant turns progressively into an owner.

If set up as the legal concept of a Co-op, it is legally allowed to ask the public to invest in redeemable shares which  would pay an interest rate which might currently be 3-4%.

This is just a brief description of the idea, obviously there is a lot of detail to ramble on about, but I’ll leave that for  the moment as it isn’t needed until people want to know more and join.

Oh, by the way. I have spent a lot of time doing all the maths and the idea does work. You can have a look for yourself if you are interested & contact me.

With the help of the crowdfunding crowd, we can cut the legs of those greedy bankers and eventually take all their mortgage business away from them so that every penny people pay to live in a home goes directly towards actually paying for that home and not the huge profits for  greedy bankers.

This idea has wings; it could take off and fly !

leave a comment if you’re interested !

MONEY CREATION DEBATE IN PARLIAMENT

November 21, 2014

READ HOW MPs DISCUSS HOW GREEDY, DISHONEST, FRAUDULENT  AND DESTRUCTIVE THE BANKING INDUSTRY IS

 

MONEY CREATION DEBATE PARLIAMENT

COMMONS Thursday November 20th 2014

FROM HANSARD – Read the full debate from the link below:

http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm141120/debtext/141120-0001.htm#14112048000001

SOME EXTRACTS FROM THE DEBATE

HANSARD 20 Nov 2014 : Column 434

Backbench Business

Money Creation and Society

11.18 am

Steve Baker (Wycombe) (Con): I beg to move,

That this House has considered money creation and society.

The methods of money production in society today are profoundly corrupting in ways that would matter to everyone if they were clearly understood. The essence of this debate is: who should be allowed to create money, how and at whose risk?………

……One of the most memorable quotes about money and banking is usually attributed to Henry Ford:

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning.”………..

How is it done? The process is so simple that the mind is repelled. It is this:

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”

I have been told many times that this is ridiculous, even by one employee who had previously worked for the Federal Deposit Insurance Corporation of the United States. The explanation is taken from the Bank of England article, “Money creation in the modern economy”, and it seems to me it is rather hard to dismiss……..

It is a criminal offence to counterfeit bank notes or coins, but a banking licence is formal permission from the Government to create equivalent money at interest…….

There is a wide range of perspectives on whether that is legitimate. The Spanish economist, Jesús Huerta de Soto explains in his book “Money, Bank Credit and Economic Cycles” that it is positively a fraud—a fraud that causes the business cycle. Positive Money, a British campaign group, is campaigning for the complete nationalisation of money production……..

We are in a debt crisis of historic proportions because for far too long profit-maximising banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced on the taxpayer by the power of the state. A blend of legal privilege, private interest and political necessity has created, over the centuries, a system that today lawfully promotes the excesses for which capitalism is so frequently condemned. It is undermining faith in the market economy on which we rely not merely for our prosperity, but for our lives………….

Even before quantitative easing began, we lived in an era of chronic monetary inflation, unprecedented in the industrial age. Between 1991 and 2009, the money supply increased fourfold. It tripled between 1997 and 2010, from £700 billion to £2.2 trillion, and that accelerated into the crisis. It is simply not possible to increase the money supply at such a rate without profound consequences, and they are the consequences that are with us today, but it goes back further. The House of Commons Library and the Office for National Statistics produced a paper tracing consumer price inflation back to 1750. It shows that there was a flat line until about the 20th century, when there was some inflation over the wars, but from 1971 onwards, the value of money collapsed. What had happened?…….

where did all the money that was created as debt go? The sectoral lending figures show that while some of it went into commercial property, and some into personal loans, credit cards and so on, the rise of lending into real productive businesses excluding the financial sector was relatively moderate. Overwhelmingly, the new debt went into mortgages and the financial sector…….

Money is used to buy houses, and we

20 Nov 2014 : Column 438

should not be at all surprised that an increased supply of money into house-buying will boost the price of those homes…………

My point is that if a great fountain of new money gushes up into the financial sector, we should not be surprised to find that the banking system is far wealthier than anyone else. We should not be surprised if financing and housing in London and the south-east are far wealthier than anywhere else. Indeed, I remember that when quantitative easing began, house prices started rising in Chiswick and Islington. Money is not neutral. It redistributes real income from later to earlier owners—that is, from the poor to the rich, on the whole…………

Once the Bank legitimises the idea of money creation and giving it to people in order to get the economy going, the question then arises: if you are going to create it and give it away, why not give it to other people? That then goes to the question: what is money? I think it is the basis of a moral existence, because in our lives we should be exchanging value for value. One problem with the current system is that we are not doing that; something is being created in vast quantities out of nothing and given away. The Bank explains that 40% of the assets that have been inflated are held by 5% of households, with 80% held by people over 45. It seems clear that QE—a policy of the state to intervene deeply in money—is a deliberate policy of increasing the wealth of people who are older and wealthier.

Douglas Carswell (Clacton) (UKIP): I congratulate the hon. Gentleman on bringing this important subject to the attention of the House. Does he agree that, far from shoring up free market capitalism, the candy floss credit system the state is presiding over replaces it with a system of crony corporatism that gives capitalism a bad name and undermines its very foundations?

Steve Baker: I am delighted to agree with my hon. Friend—he is that, despite the fact I will not be seeing Nigel later. We have ended up pretending that the banking system and the financial system is a free market when the truth is that it is the most hideous corporatist mess. What I want is a free market banking system, and I will come on to discuss that.

11.45 am

Mr Michael Meacher (Oldham West and Royton) (Lab):

It is unfortunate that it is so little understood by the public that money is created by the banks every time they make a loan. In effect, the banks have a virtual monopoly—about 97%—over domestic credit creation, so they determine how money is allocated across the economy. That has led to the vast majority of money being channelled into property markets and the financial sector. According to Bank of England figures for the decade to 2007, 31% of additional money created by bank lending went to mortgage lending, 20% to commercial property, and 32% to the financial sector, including to mergers and acquisitions and trading and financial markets. Those are extraordinary figures…

……the overwhelming majority of the money created inflates property prices, pushing up the cost of living.

In a nutshell, the banks have too much power and they have greatly abused it. First, they have been granted enormous privileges since they can create wealth simply by writing an accounting entry on a register. They decide who uses that wealth and for what purpose and they have used their power of credit creation hugely to favour property and consumption lending over business investment because the returns are higher and more secure. Thus the banks maximise their own interests but not the national interest.

Mr Jim Cunningham (Coventry South) (Lab): Given what my right hon. Friend has just said, is there not an argument, in this situation of unlimited credit from banks, for the Bank of England to intervene?

Mr Meacher: My hon. Friend anticipates the main line of my argument, so if he is patient I think I will be able to satisfy him. Crucially, only 8% of the money referred to went to businesses outside the financial sector, with a further 8% funding credit cards and personal loans….

…..The question at the heart of the debate is who should create the money? Would Parliament ever have voted to delegate power to create money to those same banks that caused the horrendous financial crisis that the world is still suffering? I think the answer is unambiguously no. The question that needs to be put is how we should achieve the switch from unbridled consumerism to a framework of productive investment capable of generating a successful and sustainable manufacturing and industrial base that can securely underpin UK living standards….

…Under the current system, around just 80 board members across the largest five banks make decisions that shape the entire UK economy, even though these individuals have no obligation or mandate to consider the needs of society or the economy as a whole, and are not accountable in any way to the public: it is for the maximisation of their own interests, not the national interest. Under sovereign money, the money creation committee would be highly transparent—we have discussed this already—and accountable to Parliament.

Mr MacNeil: I hear what the right hon. Gentleman says about money going into building, housing and mortgages, but is that not because the holders of money reckon that they can get a decent return from that sector? They would invest elsewhere if they thought that they could get a better return. One reason why the UK gets a better return from that area than, say, Germany is that we have no rent controls. As a result, money is more likely to go into property than into developing industry, which is more likely to happen in Germany.

Mr Meacher: 

…………………..The question at the heart of the debate is who should create the money? Would Parliament ever have voted to delegate power to create money to those same banks that caused the horrendous financial crisis that the world is still suffering? I think the answer is unambiguously no.

For all those reasons, the examination of the merits of a sovereign monetary system is now urgently needed, and I call on the Government to set up a commission on money and credit, with particular reference to the potential benefits of sovereign money, which offers a way out of

20 Nov 2014 : Column 449

the continuing and worsening financial crises that have blighted this country and the whole international economy for decades……..

12.13 pm

Mr Peter Lilley (Hitchin and Harpenden) (Con): 

…………A lot has been made of the ignorance of Members of Parliament of how money is created. I suspect that that ignorance, not just in Members of Parliament but in the intellectual elite in this country, explains many things, not least why we entered the financial crisis with a regulatory system that was so unprepared for a banking crisis……….

First, all bankers—not just rogue bankers but even the best, the most honourable and the most honest—do things that would land the rest of us in jail. Near my house in France is a large grain silo. After the harvest, farmers deposit grain in it. The silo gives them a certificate for every tonne of grain that they deposit. They can withdraw that amount of grain whenever they want by presenting that certificate. If the silo owner issued more certificates than there was grain kept in his silo, he would go to jail, but that is effectively what bankers do. They keep as reserves only a fraction of the money deposited with them, which is why we call the system the fractional reserve banking system. Murray Rothbard, a much neglected Austrian economist in this country, said very flatly that banking is therefore fraud: fractional reserve banking is fraud; it should be outlawed; banks should be required to keep 100% reserves against the money they lend out. ……….

If a bank lends a company £10 million, it does not need to go and borrow that money from a saver; it simply creates an extra £10 million by electronically crediting the company’s bank account with that sum. It creates £10 million out of thin air. By contrast, when a bank loan is repaid, that extinguishes money; it disappears into thin air. The total money supply increases when banks create new loans faster than old loans are repaid…….

spivs and crooks have a field day.”—[Official Report, 11 November 1997; Vol. 300, c. 731-32.]

Bob Stewart (Beckenham) (Con): I am listening carefully to my right hon. Friend. Does that mean that the banks are uncontrollable, as things stand?

 

 

MODERNISING MONEY

October 9, 2014

Money creation should only be used in the public interest

 

The same banks that caused the financial crisis currently have the power to create 97% of the UK’s money. They’ve used this power recklessly, putting most of the money they create into property bubbles and financial markets. And now they’re back to their old ways.

We need a change. The power to create money should only be used in the public interest, in a democratic, transparent and accountable way. The 1844 law that makes it illegal for anyone other than the Bank of England to create paper money should be updated to apply to the electronic money currently created by banks.

Banks create new money, in the form of the numbers (deposits) that appear in bank accounts, through the accounting process used when they make loans. In the words of the Bank of England:

“When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.” (Bank of England Quarterly Bulletin, 2014 Q1)

Conversely, when people use those deposits to repay loans, the process is reversed and money effectively disappears from the economy. As the Bank of England describes:

“Just as taking out a loan creates new money, the repayment of bank loans destroys money. … Banks making loans and consumers repaying them are the most significant ways in which bank deposits are created and destroyed in the modern economy.” (Bank of England Quarterly Bulletin, 2014 Q1)

When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets.

 

Creating a Sovereign Monetary System

 

This proposal for reform of the banking system explains, in plain English, how we can prevent commercial banks from being able to create money, and move this power to create money into the hands of a transparent and accountable body.

 

It is based on the proposals outlined in Modernising Money (2013) by Andrew Jackson and Ben Dyson, which in turn builds on the work of Irving Fisher in the 1930s, James Robertson and Joseph Huber in Creating New Money (2000), and a submission made to the Independent Commission on Banking by Positive Money, New Economics Foundation and Professor Richard Werner (2010).

Taking the power to create money out of the hands of banks would end the instability and boom-and-bust cycles that are caused when banks create too much money in a short period of time. It would also ensure that banks could be allowed to fail without bailouts from taxpayers. It would ensure that newly created money is spent into the economy, so that it can reduce the overall debt burden of the public, rather than being lent into existence as happens currently.

PDF Download:

Download Here (Free, PDF, 56 pages)

 

BELOW IS AN EXTRACT FROM THE ABOVE PDF

 

SOCIAL & ENVIRONMENTAL BENEFITS

7. TACKLING UNAFFORDABLE HOUSING

Problem: Around a third of the money created by banks goes towards mortgage lending (and a further significant proportion goes towards commercial property). This creation of money to buy pre-existing assets (i.e. houses in limited supply, and the underlying land which is in fixed supply) leads to prices rising. Rising house prices make banks even more confident about lending further amounts for mortgages (since rising prices mean that they are unlikely to lose money even in the event of a default and repossession). This becomes a highly pro-cyclical process, leading to house price bubbles.

Sovereign money as a solution: There is a need for a number of policy and tax reforms to address the problem of unaffordable housing (particularly in the UK). However, removing the ability of banks to create money will remove much of the fuel for house price inflation. House prices that rise at a lower rate than growth in wages will mean that housing becomes more affordable over time.

8. SLOWING THE RISE IN INEQUALITY

Problem: House price bubbles have the effect of transferring wealth from the young to the old, and from those who cannot get on the property ‘ladder’ to those who can. This is a significant channel through which wealth inequality is further increased.

Furthermore, the fact that the nation’s money supply must be borrowed from banks means that we are having to pay interest on the entire money supply. Household income data surveys show that this has the effect of transferring income from the bottom 90% of the population to the top 10%. (See Chapter 5 of Modernising Money for further details).

Sovereign money as a solution: As discussed above, removing the ability of banks to create money should have a dampening effect on house price rises, which in turn will reduce the rate of growth in wealth inequality.

The creation, by the central bank, of money that has no corresponding interest-bearing debt, means that there is a stock of money that is effectively ‘debt free’, and no need for members of the public to borrow simply to ensure that there is money available in the economy. The resulting lower levels of private debt will mean that less interest is paid overall, and therefore less income is transferred to the top 10% of the population. Again, this will slow the rate of growth in inequality.

 

 

THE SOCIAL ENTERPRISE IDEA TO REVOLUTIONISE THE HOUSING MARKET WITH YOUR SUPPORT

March 27, 2014

Anyone interested in  setting up a housing co-operative to buy housing to then rent to our members along the lines of the idea below ?

 

My idea is to simply set up an organisation which would continuously seek crowdfunding  for redeemable shares offering (at present) about 3-4% which would be used to purchase rentable homes. The redeemable shares would enable savers currently offered laughable savings rates by the banks to be able to use this as a safe and reliable method of  savings offering much better returns than banks.

 

The tenants to which these homes would be rented  would also share in the profit their rent ultimately generates as it pays off the purchase cost. The whole idea is to enable the tenants to build up a sum of money from the profits of the organisation for them to use as a deposit to buy their own home.

 

If the funds borrowed to 100% fund the purchase are fully repaid by means of charging rent, at the end of a term similar to an average type of mortgage of, say 25 years, then at that point the organisation would own the asset outright. It would obviously then be able to offer a portion of the value of that asset to the tenant.

 

This portion would accrue from the moment the tenant commences paying rent and would be available to the tenant whenever he leaves  which could be at any time. He does not have to remain any longer than any initial short tenancy.

 

The tenant would always be paying a ‘market’ rent the same as any other tenant. But he would be getting something back that no other tenant ever does. He will be getting back a portion of the rent he has paid which he can then use as his deposit to go and buy his own home with an ordinary mortgage if he so wishes.

 

Instead of just paying rent to line a landlord’s pocket, tenants would get something back so their rent would be not completely wasted money dow the drain as it normally is for all tenants.

 

This model would thus enable a person with no capital whatever to accrue a deposit for their own home purchase, or even use this organisation to end up either a long leaseholder on  low rent if he wished to remain in the property. It could almost be viewed as a means of just turning an ordinary rental into a (different) type of mortgage for the ultimate purchase of a home. A mortgage where no deposit is needed at all. It’s just a rental that eventually just turns into actual home ownership.

 

It offers a means of home ownership which dis-enfranchises no-one and whereby any tenant turns progressively into an owner.

 

If set up as the legal concept of a Co-op, it is legally allowed to ask the public to invest in redeemable shares which  would pay an interest rate which might currently be 3-4%.

 

This is just a brief description of the idea, obviously there is a lot of detail to ramble on about, but I’ll leave that for  the moment as it isn’t needed until people want to know more and join.

 

Oh, by the way. I have spent a lot of time doing all the maths and the idea does work. You can have a look for yourself if you are interested & contact me.

 

With the help of the crowdfunding crowd, we can cut the legs of those greedy bankers and eventually take all their mortgage business away from them so that every penny people pay to live in a home goes directly towards actually paying for that home and not the huge profits for  greedy bankers.

 

This idea has wings; it could take off and fly !

 

 

 

 

 

A RADICAL NEW WAY OF HOME OWNERSHIP

April 15, 2013

April 15  2013

I have an idea !

Well, actually, I partially nicked it from the Co-op movement. It is already up and running; I just want to do it bigger & better, so to speak.

I want to organise an alternative way of  both renting and buying a home. The idea would be to make it easier and cheaper to either rent or buy, completely bypassing the banks and other traditional mortgage lenders or private landlords.

It will almost certainly be a housing Co-op which would be a non profit making organisation with members having an equal say and equal voting rights in how it is run.

My ambition, ideally, is to set up an organisation which will ultimately attract money from Joe public (internet based crowdfunding ?) to assist it’s funding and it will tap the usual mortgage lenders available as well. As time goes on  the organisation will be able to build up it’s own capital and increasing funding abilities. The general aims are:

– To offer an infinitely more reliable and attractive rental model than the vagaries of the current private landlord  buy to let market, whereby tenants can choose to remain tenants on  exceptionally attractive terms compared  with what is currently available in either the private rental market or the social housing market, or they can become homeowners utilising only their rental history if that is their only source of funding.

– To enable tenants to become homeowners by means of using their rental incomes in an appropriate manner, probably exactly similar to a rare but existing model already set up by a housing co-op.

– To actively expand the organisation as far and wide as possible to make it very widely available – ultimately ideally throughout the country.

– To use marketing and publicity skills to do this in order make the public widely aware  of an alternative method of a more ‘user friendly’ concept of accessing housing, sweeping away much of the expensive nonsense which has been largely generated during the past few decades in both the rental market and the house purchase market.

The housing market, whether buying or renting, was utterly different sixty or seventy years ago. Since then layers of utter nonsense have been imposed on it, making it increasingly expensive to either rent or buy. Most of this expensive, restrictive & thoroughly poisonous nonsense has been driven directly and indirectly by the banks who have been the architects responsible for shaping the entire housing market as it currently stands.

Because of this the cost of buying a house has soared from about three times  a person’s annual income to about ten or eleven times today. Equally, rental costs have soared to unaffordable levels too. The only beneficiaries are really only banks and private landlords. All other classes of home occupiers are disadvantaged and will continue to be so until something changes this.

All this is only likely to get worse until the stranglehold of the banks on the housing market is broken. The only way this can be achieved is to provide the sort of alternative I have in mind, whereby, ultimately, funding for housing will be increasing taken away from the banks and put into the hands of existing homeowners and ‘Joe public’ who will find it attractive to place savings to be used to fund home purchase because their savings will be safer than with banks and return a higher amount of interest on any loans made for home purchase than the banks normally pay to savers.

It becomes possible to understand this can be done simply by imagining a private landlord setting up in business to borrow money to buy homes to rent to people and instead of the profit becoming  owned by the landlord, the profit is used only to expand the business and enable the tenants to both rent on far more attractive terms than elsewhere or to eventually own their own home.

I would wish to explore the possibility of turbo boosting what I have in mind by enrolling high profile help from others. Possibly, for example, certain existing housing trusts, charities and others to be considered in due course.

There are ‘social lenders’ out there who lend at low interest rates for housing purposes. And, interest bearing shares can be marketed in a ‘Community Land Trust’.

Is anyone interested in becoming involved in this ?

Here are some interesting web sites to have a look at.

Leave a comment if you might be interested in becoming involved in any way – either by becoming a member or just helping to organise it.

http://www.somerset.coop/landtrust

 

http://www.somerset.coop

http://www.uk.coop 

http://www.co-operative.coop/enterprisehub

What are banks for?

January 18, 2013

– from ‘Punch’ Magazine – 3rd April 1957

Q: What are banks for?
A: To make money.

Q: For the customers?
A: For the banks.

Q: Why doesn’t bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to reserves of £249,000,000,000 or thereabouts. That is the money they have made.

Q: Out of the customers?
A: I suppose so.

Q: They also mention Assets of £500,000,000,000 or thereabouts. Have they made that too?
A: Not exactly. That is the money they use to make money.

Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.

Q: Then they haven’t got it?
A: No.

Q: Then how is it Assets?
A: They maintain that it would be if they got it back.

Q: But they must have some money in a safe somewhere?
A: Yes, usually £500,000,000,000 or thereabouts. This is called Liabilities.

Q: But if they’ve got it, how can they be liable for it?
A: Because it isn’t theirs.

Q: Then why do they have it?
A: It has been lent to them by customers.

Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.

Q: And what do the banks do with it?
A: Lend it to other customers.

Q: But you said that money they lent to other people was Assets?
A: Yes.

Q: Then Assets and Liabilities must be the same thing?
A: You can’t really say that.

Q: But you’ve just said it! If I put £100 into my account the bank is liable to have to pay it back, so it’s Liabilities. But they go and lend it to someone else and he is liable to have to pay it back, so it’s Assets. It’s the same £100 isn’t it?
A: Yes, but..

Q: Then it cancels out. It means, doesn’t it, that banks haven’t really any money at all?
A: Theoretically..

Q: Never mind theoretically! And if they haven’t any money, where do they get their Reserves of £249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.

Q: How?
A: Well, when they lend your £100 to someone they charge him interest.

Q: How much?
A: It depends on the Bank Rate. Say five and a- half percent. That’s their profit.

Q: Why isn’t it my profit? Isn’t it my money?
A: It’s the theory of banking practice that…

Q: When I lend them my £100 why don’t I charge them interest?
A: You do.

Q: You don’t say. How much?
A: It depends on the Bank Rate. Say a half percent.

Q: Grasping of me, rather?
A: But that’s only if you’re not going to draw the money out again.

Q: But of course I’m going to draw the money out again! If I hadn’t wanted to draw it out again I could have buried it in the garden!
A: They wouldn’t like you to draw it out again.

Q: Why not? If I keep it there you say it’s a Liability. Wouldn’t they be glad if I reduced their Liabilities by removing it?
A: No. Because if you remove it they can’t lend it to anyone else.

Q: But if I wanted to remove it they’d have to let me?
A: Certainly.

Q: But suppose they’ve already lent it to another customer?
A: Then they’ll let you have some other customers money.

Q: But suppose he wants his too…and they’ve already let me have it?
A: You’re being purposely obtuse.

Q: I think I’m being acute. What if everyone wanted their money all at once?
A: It’s the theory of banking practice that they never would.

Q: So what banks bank on, is not having to meet their commitments?
A. YOU GOT IT!

– from ‘Punch’ Magazine – 3rd April 1957