.Robin, way back in mid seventies, following a few years article ship with PW as it was then known, Price Waterhouse, I qualified as an accountant. Did about a year as a qualified accountant but found it extremely boring and gave it up choosing to be my own boss
I don’t blame you!
I understand fully how the banking systems work, I also understand that money is the vehicle of carrying out transactions be it wine, food or other commodities. It appears to me that you are inferring that money does not exist when in fact money does not only exist but it screams at you on a daily basis.
Correction! You can use money but you would normally use currency, and there is a difference. Money today does not exist in any quantities because money has intrinsic value in its own right, whereas currency only has a face value. Thus a Gold coin is money but what you would buy it with is today .... Fiat currency. Which has no intrinsic value as a commodity simply the number printed on it.
The bank can lend you money and once credited to your account you may do as you please with it, Issue cheques to pay creditors, salaries etc. You may also draw out from Cash Machines up to your daily limit or walk into a bank and take out, in the case of the UK, up to £10,000 in Cash. You may also transfer money to another account on your on-line banking or to any other account that you nominate as the recipient , ie if you are purchasing a car or any other goods.
You are missing the basic point ............ where does the bank’s primary resource come from? The banks DO NOT lend you money .... they create a debt ..... just as on a credit card!
VISA, Master Card or American Express don’t put money into your account so you can spend it ..... they grant you credit to spend something you don’t have! Your account starts off empty, (if you pay off your previous debt), and from that point on it goes negative in value as you spend on the card until you pay it off again. The difference between a credit card account and the same process with a bank account, is that the card company has a liability to pay the establishment where you made the transaction......... but the bank has no such liability to pay anybody ..... so they just write it off the books !
The reality is the numbers in your account were created as a book keeping entry. Until your recipient credited his account with your transfer note, that number (‘curencty’) did not exist. It was that action of depositing it into his account, which created the credit entry allowing him to spend as you describe.
What you are describing is what you can do with these numbers ONCE they have been created, it does not address the creation process ! But how are these numbers you now use in transactions, generated in the first place. Answer: 100% created by banks as debt every time they make a loan. Read the BoE bulletin ......... that process is what it explains among other things, in detail.
In ancient times of course bartering was the method used , it is still used today ie PE on a vehicle purchase, the end story boils down to money.
I can't argue with that as a statement! Everything boils down to ‘money’ ..... it is how that currency comes into being, that is what I am trying to explain.
It is not some looney conspiracy theory, although many use that term because THEY don’t understand the concept. It is a provable fact and a view supported by pretty credible sources such as the BoE, FED and ECB. They all say the same thing ...... banks create money simply as a book keeping entry ..... it is backed by nothing more than faith in its creator, that is why it is known as Fiat currency.
This is the guy that actually proved it. ( This is economics/accounting and maybe too detailed in parts as it goes back into the history of economics, as it is associated with currency creation)
http://www.sciencedirect.com/science/article/pii/S1057521914001434 Discusses the accounting anomilies between the banking and other businesses, that allows them and not others to create money’
http://www.sciencedirect.com/science/article/pii/S1057521914001070 The empirical tests that proved the ‘Creation Theory’ is how a loan, where banks create ‘money’ out of a computer entry, is exactly how it works
http://www.sciencedirect.com/science/article/pii/S1057521915001477 A lost century in economics: Three theories of banking and the conclusive evidence.
All three papers make good reading if the subject interests you.
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