Well, if you say so

Richard Murphy says:
October 3 2017 at 2:44 pm
I really think you might need to think hard about what banking is

Banks do not lend out depositors money

It really is time people realised that

O know what he’s saying, you know what he’s saying too. But we’ve still got this problem, if banks don’t lend out deposits then how can it be possible to have a bank run? Which is when a bank loses the deposits which fund its loans?

Spud’s never even offered a thought about that point, has he?

27 thoughts on “Well, if you say so”

  1. Tim

    Don’t you understand anything you neoliberal troll?

    The Curajus state will step in and provide funding from People’s QE in the event of a bank run. And of course this will not be inflationary in any sense.

    And I have seen a flotilla of pigs flying – yet you ignore that

    Next you will be telling me that pigs cannot fly

    Candidly, your time here is at an end

  2. Candidly, you have not thought about this in detail. Bank runs only occur because branches run out of notes to give depositors. This is the only constraint on banks. In the Curajus State all branches will have their own printing presses to ensure customer demands for cash are always met. And all banks will be located next to wheelbarrow shops to transport said notes.

    Please do not trouble me again with your neoliberal trolling.

  3. what he’s saying is that because banks magic money out of nowhere to lend to people (and as any fule kno, that is how banksters work, less of the neoliberal tittering at the back) it is impossible for a bank to run out of money as it can produce more literally at the swipe of a few keys

  4. Murphy has been advising SNP.
    In Scotland RBS, BoS and Clydesdale can print notes.
    In England, Lloyds, Barclays etc cannot – so the underprivileged English banks can only lend £ notes deposited with them. LHTD will immediately announce that Barclays creates a deposit when it makes a loan so it doesn’t have to hand over a £ note (or £10 note) but when a tradesman comes in and wants some money to buy his lunch some bank has to cough up a £5 note. So in the real world bank can only lend money if they have some deposits.
    Murphy never has to handle real cash but the working class does (and so do I when I buy bread or fruit or vegetables)

  5. Not quite right here. Banks lend money by creating a deposit in someone’s account so the balance sheet is inflated and everything matches,

    This is distinct from liquidity though. Once someone goes to withdraw the deposit the bank needs cash. The cash has to be borrowed from somewhere, usually another bank with excess deposits, or from the ultimate cash created, the bank for England.

    Since we are a (physical) cashless society all money rolls back into a bank deposit at some point quite quickly so he is technically correct but practically it really doesn’t matter.

  6. I sneeze in threes

    To allow them to print their funny Jockanese money it needs to be backed by proper English money, with such glorious names such as Titans and Giants (Al Murray, pub-landlord voice)


    “What are backing assets?
    To back their banknote issue, authorised banks may use a combination of Bank of England banknotes, UK coin and funds in an interest bearing bank account at the Bank of England. Bank of England banknotes held as backing assets may be held at an authorised location or at the Bank of England. Banknotes held at the Bank may include £1 million notes (Giants) and £100 million notes (Titans), which in physical terms are permanently held at the Bank. These backing assets would be used in the event that the Bank had to implement a Note Exchange Programme.”

  7. Bentham, despite things like Panopticon, did actually think. That head is probably still doing more of such….

  8. The Million pound bank note.

    Tv series when I was a kid. Unless my memory is going. The problem being that it couldn’t be spent. I think. Or something. Memorable obviously.

  9. Amusing that the severed head is being tested for aspergers or autism.

    These days everyone is on the spectrum.

    I’m mildly aspergers. So are you. He’s totally autistic. Everyone’s a retard. Except the psychopaths.

    In fact that’s the title of my next “you are not to blame for being a total fuck-up” book.

    “Everyone’s a retard except the psychopaths”

  10. If you don’t lend on deposits, then you don’t need deposits.

    So what stops anyone just starting a bank from nothing?

  11. Ritchie really can’t join the dots in his own thinking.

    One minute Singapore is an evil tax haven sucking in another state’s money due to low taxes (as it suits his anti tax haven narrative), then Singapore is a model state because it has lots of state housing despite lower taxes than the UK (as it suits his anti-Tory narrative).

    I think it’s more the “Confused State” than a Carajus one.

  12. I remember The Million Pound Note. Probably because of Gregory Peck, but also because I like any film with Wilfrid Hyde-White in it.

  13. john77 said:
    “In Scotland RBS, BoS and Clydesdale can print notes.”

    They used to be able to issue very limited quantities on their own account (up to the amount they had in issue at some historic date, so very little in today’s terms), and then anything above that had to be backed by deposits at the Bank of England. But I think even that limited private issue was stopped after the Brown Crash.

  14. BraveFart said:
    “Remarkable facial resemblance here in my view to Professor Murphy – http://www.telegraph.co.uk/science/2017/10/02/severed-head-eccentric-jeremy-bentham-go-display-scientists/

    Hmm; perhaps more than just physical resemblance:
    “biographies described a young Bentham as ‘having few companions his own age’; and being ‘morbidly sensitive.’”

    However Bentham was “reclusive and difficult to get hold of” – a pity Murphy doesn’t take after him in that.

  15. Encyclopaedia Britannica Vol 12 p357 15th ed (1981)
    “In the course of issuing money the commercial banks actually create it by expanding their deposits but they are not at liberty to create all they may wish ,whenever they wish, for the total is limited by the volume of bank reserves and the prevailing ratio between these reserves and bank deposits – a ratio that is fixed by law , regulation or custom.”
    You appear ignorant of the enforced legal, regulatory or customary ratio of bank deposits to bank reserves.

  16. @ DBC Reed
    So Banks lend their depositors’ money several times over and you disagree with Murphy.
    Actually I am quite aware of fractional-reserve banking – I just think the EB is misusing language when it talks of “creating” money when the banks are *expanding* it. The typical idiot living in Ely thinks that this means “creating out of nothing” which is a divine attribute that covets for himself.

  17. “I just think the EB is misusing language when it talks of “creating” money when the banks are *expanding* it.”

    His error is that it’s not the banks creating it. It’s the borrowers. Unfortunately, people working for banks often make the same mistake.

    “The typical idiot living in Ely thinks that this means “creating out of nothing””

    Money is a credible, enforceable, and transferable promise to pay something of real value at a later date. You can make promises “out of nothing”, but you do have to create the goods and services to repay the obligation at a later date.

    What banks do is broker liquidity. A borrower comes in, and puts a signature on a loan agreement turning it from a 5p sheet of printed paper into a £100k contract promising to repay with a lifetime’s labour. (i.e. they create money.) In return, the bank gives immediately spendable credit, using its deposits to grant this credit liquidity. The requirement for liquidity is why banks have a limit to how much they can loan. But they don’t need 100% liquidity – only enough to cover the maximum amount typically being redeemed for goods/services at any one time. That’s why they can use a fractional reserve.

    It’s complicated and non-intuitive, and there are a lot of bad explanations around. But a teacher of economics at a university ought to know better.

  18. @ NiV
    The typical bank overdraft or credit card debt is not transferable at anything like face value so it isn’t very qood quality money.

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