Banks and market socialism

Justin Schwartz jschwart at
Sun Feb 4 22:15:32 MST 1996

Probably I would be better off if I studied some accounting, and I may, if
I can work the course on accounting for lawyers into my studies. Still, I
don't buy it. The accounting conventions you describe are just
conventions. The point is that the government has money it can make
available for investment. If you want to consider it in terms of a
financial market, it loans these at interest--it's the only body legally
permitted to do so--to firms. The use tax paid on the assets represents
the interest rate. I suppose one could make a calculation argument with
respect to the state control of investment, that the state won't be bale
to gather and computre the best investment information. Schweickart tries
to defeat this by having the large scale investments--percentage of GNP to
health vs. defense, etc.--made at a high level in broad strokes. The small
decisions are made by local state banks which have the same information
vailable to them that private banks would, less the information a stock
and bond market would provide.

I don't see why this situation would produce underinvestment and
unemployment. On the contrary, my worry is that it might produce
overinvestment. Hence my debate with Peter about "free" credit.


On Sun, 4 Feb 1996, Paul Cockshott wrote:

> > to My message
> >
> > Are we then to suppose banks with liabilities
> > and no assets?
> >
> Justin replied:
> The banks' assets are established by funds raised from taxation. --jks
> Paul
> ----
> I really think you could defend your case better were
> you to pay some attention to studying accountancy.
> Your proposed solution agravates matters.
> If the state treasury levies taxes and deposits these
> with the banks, this increases the liabilities of the
> banks ( in that the treasury has a credit balance in
> its bank account ) to the same extent that the banks'
> assets, in the form of notes and coin increase.
> There is thus no net increase in the banks assets
> arising from the transaction.
> But it agravates matters, insofar as the formation of
> a hoard - the accumulated notes and coins - constitutes
> an interruption of the aggregate circuit c-m-c and
> must thus result in unsold commodities and consequential
> unemployment.
> A bank differs from a strong room in having two types
> of assets - notes and coin being but the smaller part,
> the greater being loans that it makes. Either you must
> admit that you are going to have a banking system, with
> the bank loans that this implies, and thus the existence
> of finance capital, or you are proposing a reversion to
> a cash economy - on which no large scale development
> of trade has ever proven possible. If your banks have
> liabilities but no assets other than notes and coins,
> they are not banks, just glorified safe deposit boxes.
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