http://www.lewrockwell.com/orig9/shostak7.html
Would Cleansing Banks’ Balance Sheets Kick-start the US Economy?
by Frank Shostak
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Again, note that what makes the lending possible here is not money but the saved consumer goods. Money just serves here as a facilitator. Or we can say that the act of lending here is about the transfer of final consumer goods from lender to a borrower with the help of money.
The essence of credit will not be altered by the introduction of banks. Instead of lending money directly, John could now engage in lending through the intermediary. (John transfers his money to the bank. The bank lends the money to a borrower.)
Real savings determines the size of credit. What people really want is real stuff, i.e., real savings and not money as such. Hence, as long as banks facilitate credit that is fully backed by real savings, they should be seen as the agents in the transmission of wealth.
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(Disclaimer: I’m an injineer that got D’s in economics.)
This little morality play about savings misses three factors that I think are significant.
The theft of money by inflation. It in effect “steals” from every dollar holder and acts as a hidden tax.
The interest rate controlled by the central bank “taxes” savings both when the rate is too high and too low.
The baker and all who consume bread are forced to “save” by virtue of these taxes.
When money is debased, all economic calculations are done with a “broken calculator”.
IMHO!
As I said I’m just a dumb old injineer!
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