Banks and market socialism
wpc at clyder.gn.apc.org
Sun Feb 4 15:27:45 MST 1996
> to My message
> Are we then to suppose banks with liabilities
> and no assets?
The banks' assets are established by funds raised from taxation. --jks
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
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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