Friday, August 05, 2011

Banking Myths

The first banks were the merchants of ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia. Later in ancient Greece and during the Roman Empire lenders based in temples would make loans but also added two important innovations; accepted deposits and changing money. During this period there is similar evidence of the independent development of lending of money in ancient China and separately in ancient India. The Templers began generating letters of credit for pilgrims journeying to the Holy Land: pilgrims deposited their valuables with a local Templar preceptory before embarking, received a document indicating the value of their deposit, then used that document upon arrival in the Holy Land to retrieve their funds. This innovative arrangement was an early form of banking, and may have been the first formal system to support the use of travellers cheques. The Order of the Knights Templar arguably qualifies as the world's first multinational corporation. Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. Perhaps the most famous Italian bank was the Medici bank, set up in 1397. A bank was founded in 1609 under the protection of the city of Amsterdam. This bank at first received both foreign and local coinage at their real, intrinsic value, deduced a small coinage and management fee, and credited clients in its book for the remainder. This credit was known as bank money. Being always in accord with mint standards, and always of the same value, bank money was worth more than real coinage. At the same time a new regulation was introduced; according to which all bills drawn at Amsterdam worth more than 600 guilders must be paid in bank money. This both removed all uncertainty from these bills and compelled all merchants to keep an account with the bank, which in turn occasioned a certain demand for bank money.

Events such at the appropriation of £200,000 of private money by King Charles I from the royal mint, in 1640 caused merchants to lose trust in the existing institutions and drive them to find more trusted alternatives such as the goldsmiths. The goldsmiths soon found themselves with money for which they had no immediate use, and they began to lend the money out at interest to both the merchants and the government. Finding substantial profit in this business, they began to solicit deposits and pay interest on them. The goldsmiths eventually discovered that the deposit receipts they provided were being passed on from one person to another in lieu of payment in coin, which prompted them to begin lending paper receipts rather than coins. By promoting acceptance of the receipts as a means of payment, the goldsmiths discovered they could lend more than the gold and silver coin they had on hand, a practice that became known as fractional-reserve banking. These practices created a new kind of "money" that was actually debt, that is, goldsmiths' debt rather than silver or gold coin, a commodity that had been regulated and controlled by the monarchy. This development required the acceptance in trade of the goldsmiths' promissory notes, payable on demand. Acceptance in turn required a general belief that coin would be available; and a fractional reserve normally served this purpose. The monarchy's urgent need for funds at rates lower than those charged by the goldsmiths, and the example of the public Bank of Amsterdam, which had been able to make an ample supply of credit available at low interest rates, led in 1694 to the establishment of the Bank of England. The Bank of England succeeded in raising money for the government at relatively low rates.

The issue of the fractional reserve money and the money supply seems to be generating a huge amount of confusion when the issue is really quite simple. An urban myth is circulating on the internet that banks have been creating money out of thin air. This is another one of the millions conspiracy theories that have existed in the Earth before biblical times until now, and all of them are based on false ideas. Bank can not produced nothing from nothing, money is transformed into capital ( or dead labor ) by a process in the capitalist mode of productions, and it is a product of exploitation, and it did not all from heaven. This concept has been propagated by groups that believe the world is controlled by twelve banks owned by Jews, and therefore, the whole world is controlled by the Jewish people, and they are the ones that controlled the US instead of blaming the problems of our world in the capitalist mode of productions, they are blaming them on somebody else. It is like the Neo-Nazis are blaming the real estates crisis of the US on the Latin American, the blacks and other minorities, instead of blaming the problem on the capitalists over-production, and it is a normal crisis of the capitalist society, and not only that, it is an indication that capitalism is operating properly. Socialists have argued that banks just cannot create purchasing power at will and if they could it would be a negation of the Marxist labour theory of value. There are other flaws in this urban myth that banks can create new money. The ability of borrowers (and most bank lending is to capitalist firms rather than individuals) to pay interest depends on industries which employ people making a profit and continuing to pay wages to their their workers. So, in this sense, interest is a share of profits and so depends on profits being made. As long as profits are being made then finding the money to pay interest won't be a problem. Capitalism won't collapse but it will go through a rough time when profits are down (but they always recover sooner or later).

Terms should always be defined otherwise people risk talking at cross purposes. By "banking system" is meant - all banks together including the Fed. The other term that needs defining is "money". Modern Money Mechanics defines it as currency (MO) + bank loans = M1. Confusion often arises when people think, when this claim is made, that you are talking about M0 when in fact you are talking about M1. This is why it is best to keep to the original definition of money as what the wiki passage calls "base money", i.e money issued by the central bank or government. To include bank deposits arising from bank loans as money is just confusing. (Of course it is useful to know how much money banks do lend, but there's no need to call this "money").

A bank cannot lend more than savers have deposited with it, that in fact it can only lend less than this as it has to keep a proportion of these as a cash reserve to cater for any withdrawals savers are likely to make. Banks don't create money out of nothing. They can only lend out what has been lent to them and they make their profit out of the difference between the rate of interest they charge their customers and the rate of interest they pay their depositors (or they pay on money they borrow on the money market). Generally, small banks are deposit-rich and large banks are deposit-poor. Large banks loan out more money than has been deposited with them by borrowing from small banks. Small banks themselves borrow from depositors and other banks as well. An entire national economy can loan out more money than has been deposited in its banks by borrowing from foreign banks. Money is also printed by the Treasury and injected into the economy through the Federal Reserve, which loans to banks. (Something similar is done in other countries but I don't think there is a strict separation of Treasury and Federal Reserve in most countries.) There is nothing "bizarre" about this. Banks loan out more money than are initially deposited with them, because the initial deposits will cause a certain amount of lending, which causes additional deposits, which causes additional lending, up to a point determined by the reserve ratio. But the total deposits will always be greater than the total money lent, unless we count the money that enters the money from the central bank or treasury.

Many dherents to banks create money out of thin air assert that, with a cash ratio of 10%, a single bank on receiving a deposit of $10,000 can then immediately lend out $90,000 and claim support for this in Modern Money Mechanics. It is not what Modern Monetary Mechanics says. This booklet claims only that the whole banking system, not a single bank on its own, can, under favorable circumstances, increase the money supply (defined so as to include bank deposits and bank loans, not just currency) by x times (depending on the fraction that banks have to keep as a cash reserve) the initial deposit. If this statement was true, then people should be opening their own bank. The trouble is that everybody else would be too. The fact that they aren't is surely further confirmation that it is not true. Modern Money Mechanics argues that, with a cash ratio of 10 percent (which means that banks are required to keep at least 10 percent of what is deposited with them as cash), the "banking system" can expand the "money supply" by 9 times. But it definitely does not say that a single bank can do this on its own if it receives a deposit from the Fed (or from anywhere else). What banks can do is expand M1 but not M0. They do this when they give anyone a loan in the form of a current account. Nothing is remarkable or fraudulent in this. It's what banks (and loan clubs and credit unions) do. If you include loans via current accounts in the definition of money then of course banks can "create" money. What banks are doing is creating loans not out of thin air but out of the money deposited with them. Banks "create" money but this is only because it defines money as including bank loans (since by bank deposits it means not just what savers have deposited but also deposits banks have opened for those borrowing money from it). This means that, by definition, a bank "creates money" every time it grants a loan. Which in fact is not saying much more than that banks lend money. The real question is: in granting a loan does a bank create extra purchasing power which didn't exist before? This definition is misleading in that it does suggest that this is what banks do. But this is not the case (and the passage does not in fact say this). A bank can only lend already existing purchasing power. It can only lend money it already has, either from deposits by savers or what it has itself borrowed on money markets or its own money. What banks do is to channel money that people don't want to spend for the time being to those who need money (but don't have it) for some project. In lending this money they are no more creating extra purchasing power than I do if I lend you $1000. They are just redistributing it from one person to another. Both the depositor and the borrower cannot spend the same money (any more than you and me could both spend the $1000 I lent you). When a bank makes a loan it doesn't creates money. When a bank makes a loan it loans already existing money, either which savers have deposited with it or which they have themselves borrowed (usually on the money market) or their own money.

In the chapter "Bank Deposits - How They Expand or Contract" it is assumed that the Fed wants to expand "the money supply" ( essentially bank loans), so what it does it to buy "$10,000 of Treasury bills from a dealer in US government securities". This bank (Bank A) now has $10,000 extra cash. As it only needs to retain 10 percent as cash it can now lend out $9,000. It cannot lend, as the way you originally put it suggests, keep the whole $10,000 as cash and lent out $90,000. What happens, according to the booklet, is that Bank A's loan of $9,000 is spent and finds its way back to other banks in the system. Assuming it all ends up in Bank B (which won't be the case since parts of it would normally end up in many different banks), then Bank B has an extra $9,000. It can now lend out 90 percent of this, i.e. $8,100. This in turn ends up in Bank C, which can then lend 90 percent of this, ie. $7,290. And so on till in the end a total of $90,000 will have been lent out. Note that even this will not have been created out of "thin air" since it requires the money from the original $10,000 to be continually re-deposited. If, for some reason it isn't, then the process stops and/or the total amount of bank loans does not reach its theoretical maximum.

A more accurate description of the Fractional Reserve process can be found at page 5
"The fact that banks are required to keep on hand only a fraction of the funds deposited with them is a function of the banking business. Banks borrow funds from their depositors (those with savings) and in turn lend those funds to the banks borrowers (those in need of funds). Banks make money by charging borrowers more for a loan (a higher percentage interest rate) than is paid to depositors for use of their money. If banks did not lend out their available funds after meeting their reserve requirements, depositors might have to pay banks to provide safekeeping services for their money. For the economy and the banking system as a whole, the practice of keeping only a fraction of depositson hand has an important cumulative effect. Referred to as the fractional reserve system, it permits the banking system to "create" money." (The inverted commas round "create" are particularly appropriate. They should also have been around "money" as they are using the word to include "bank deposits" and nobody denies that the circulation of money through the banking system leads to an increase in the number of bank deposits.)

The New York Federal Reserve also gives a rather more sophisticated explanation at
"Reserve Requirements and Money Creation: Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.
In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels. Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States." (Note that the pyramid is based on the assumption that the money loaned on the basis of the original deposit is also deposited in a bank.)

Backpack Banking

Let's look at a very simple, analogous example that should clarify the issue.

Let's say that we have a holding facility for backpacks. People drop off (aka deposit) their backpacks at this holding facility, and the holder of the backpacks loans out backpacks to those who need them. If you deposit a backpack with him, you can withdraw it at any time with no advance notice. There is no money paid for the service. No backpack-interest is paid (i.e. if he loans you a backpack, he expects to receive it back after a certain period of time, let's say 1 month -- he does not expect 2 backpacks in return for his loan). All of the backpacks in this society are identical. Anyone who deposits his backpack receives a receipt saying "1 backpack" on it. The holder of these backpacks (let's call him the "banker") keeps account of all the backpacks deposited with him, all of the backpacks on reserve, all of the backpacks loaned to others, and all of the backpacks owed. When youleave a backpack with him, this goes down in his ledger both as a liability (since he owes you a backpack) and as an asset (since he has a backpack). When he loans out a backpack, he records this as an asset.

The banker starts with a reserve of 1 backpack, which was his initial capital that he started with. This is an asset. He expects to keep a total of 1 backpack as an asset at all times (after canceling out liabilities and assets) since that is what he has started out with, and he is not in this business in order to accumulate backpacks but
just to increase the distribution of existing backpacks. He already knows, from previous conversations with famous bankers, that during the month in question, the total number of customer withdrawals is never greater than 1 backpack.

Let's say you, Mr. X, deposit 1 backpack with this banker. He credits your account for 1 backpack, and gives you a receipt letting you know that you have 1 backpack in your account. He goes to his own ledger, and notes that he now has 2 backpacks as assets (the backpack on reserve and the backpack you have loaned him), and 1 backpack as a liability (the backpack in your account).

He doesn't want to keep unnecessary reserves of backpacks in his holding center, so he takes your backpack and loans it to Mr. Y. Mr. Y agrees to give it back to the banker at the end of the month. The banker still has 2 backpacks as his assets (but now 1 is a reserve and 1 is a loan to Mr. Y) and 1 backpack as his liability.

As it so happens, Mr. Y does not need the backpack until next week. So he gives it to the banker to hold for him. The banker gives Mr. Y a receipt saying "1 Backpack", credits Mr. Y's account for 1 backpack, and then goes to his own ledger and counts this backpack as both an asset in his reserve of backpacks, and as a liability. He now has assets of 3 backpacks (2 in his reserve and 1 out on loan to Mr. Y) and liabilities of two backpacks (1 backpack in Mr. X's account and 1 backpack in Mr. Y's account).

Since he still has more than enough backpacks in his reserve to cover the usual number of withdrawals during this month of the year, he loans out a backpack once again, now to Mr. Z. Mr. Z agrees to repay the backpack within 1 month. Unlike Mr. Y, Mr. Z actually needs to use the backpack as his school starts the next day. So he does not deposit this backpack, but just uses it. The banker still has assets of 3 backpacks (but now 1 is in his reserve, 1 has been loaned to Mr. Y, and one has been loaned to Mr. Z) and liabilities of 2 backpacks (still one backpack each in the accounts of Mr. X and Mr. Y).

Looking at it from the perspective of the deposits, Mr. X has 1 backpack in his account, Mr. Y has 1 backpack in his account and one which he owes to the bank within 1 month, and Mr. Z has -1 backpacks.

Over time, economists come along and claim that backpacks are not actually the things you wear on your back, but just ledgers in the accounts of a banker. It is said that Mr. X, Mr. Y and Mr. Z, all have backpacks, except in different forms. The banker has apparently created 3 backpacks, if not out of nothing then out of 1 backpack deposit, and economists look upon this situation as a miracle which arises from the peculiar power of the backpack holding system.

But let's say Mr. X decides he wants his backpack today. He withdraws one backpack from his account. To do honor this claim, the banker has to give Mr. X the 1 backpack that was in his reserve. The reserve is now down to zero, and Mr. X's account has zero backpacks in it. The banker's ledger now reads 2 backpacks as assets (the backpacks loaned to Mr. Y and Mr. Z) and 1 backpack as a liability (in Mr. Y's account). The banker thinks he is okay, since he already suspected that 1 backpack would be withdrawn this month, and he does not expect any more backpacks to be withdrawn until the beginning of the next month, at which point he will have been repaid his loan to Mr. Z and perhaps will have received additional deposits.

As it so happens, Mr. Z's dog eats his backpack and he is forced to default on his debt. The banker has to erase 1 backpack from his assets, so he now has 1 backpack as an asset (the backpack loaned to Mr. Y) and one backpack as a liability (the backpack in Mr. Y's account). But the backpack loaned to Mr. Y was already deposited at the bank and credited to his account. Mr. Y decides he wants the backpack the next week, because school is about to start. He tries to withdraw the backpack but his claim cannot be honored as there are no reserves at the bank. The bank is insolvent and is forced into bankruptcy.

So what has happened in in this hypothetical bank? Have new backpacks been created by loaning out backpacks? No. All that has happened is that the distribution of backpacks has changed. People who are not using their backpacks allow the bank to loan their backpacks out to others, with the expectation that their backpacks will return to them, just as if they held their money in a safe and withdrew their money from time to time, as necessary. The bank has economized on backpacks by reducing the need to form hoards. In the absence of a holding system for backpacks, each owner of a backpack would need to have his own backpack and hold it himself while he isn't using it. Instead, in the banking system, 1 backpack can supply the needs of 3 backpack users. Also note that deposits have not actually increased the
bank's assets, since any backpack the bank acquires through a deposit is not only an asset, but also a liability, which cancels it out. It is neutral.

This all can be applied, with appropriate modification, to a bank that holds money and lends it out at interest.

A bank does not create money whether we consider this from the point of view of an individual bank or the banking system. A bank receives money and credits it to your account, which is basically an IOU saying that the bank will pay you whenever you wish to withdraw your money. In normal circumstances it functions just as well as a piggy-bank would -- in fact even better, as it is simpler to use, there is no need to pay for security costs once the sums get large, and you earn interest on your money. When two customers of the same bank participate in some kind of purchase/sale of a commodity and one writes a check to the other, the bank simply credits the account of one client and debits the account of the other. (Just like if person A owed person B $20, and I owed both person A and B $20, and they agreed to have me pay person B $40 and pay no money to person A.) No money actually enters into the transaction. In Marx's terminology, money figures in here only as a measure of value, not as a means of circulation. The same thing holds in the case of two customers at different banks, where the checks go through a clearing house and cash is only used to settle the balance. The banking system greatly reduces the need for means of circulation, since physical money is only needed to settle remaining balances between parties. But any time you are loaning money out, there is a chance that the money will not return to you and it will be lost. The fact that the bank doesn't create money becomes obvious during a commercial crisis, during which too many depositors try to redeem their IOUs (their deposits) than can be redeemed.

Another description can be read here

Banks get money from what we deposit in them. Deposits are banks’ liabilities, since banks must return it to us when we ask for the money. Banks lend loans by using this deposit money of ours. Loans are bank’s assets.

The Cash Reserve Ratio:

Reserve Bank of India (RBI) is the central note issuing authority in India. Commercial Banks in India are required to hold a certain proportion of their deposits in the form of cash. This minimum ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. It is a tool used by RBI to control liquidity in the banking system.

The Process: Let’s assume there are various Banks in the Banking System. Bank_1, Bank_2, Bank_3, etc. Let’s assume the CRR to be 10%.

Anand deposits Rs. 100 in Bank_1. Keeping Rs. 10 in reserve (CRR is 10%), Bank_1 lends Rs.90 to Bala. Bala deposits his Rs.90 in Bank_2. Keeping Rs. 9 in reserve, Bank_2 lends Rs.81 to Clara. Clara deposits her Rs.81 in Bank_3. This process continues.

The Math Behind This: Time for some calculations. In the first cycle, the bank could loan out 90% of Rs.100. In the second cycle, the bank could loan out 90% of 90% of Rs.100. Thus the amount of money the bank can loan out in some period n of the cycle is given by:Rs. 100 * (90%)n

Let A be the amount of money infused into the system (in our case, Rs. 100) Let R be the required reserve ratio (in our case 10%). Let T be the total amount the bank loans out Let n represent the period we are in.
From the equation above, the amount of money the bank can loan out in any period is:

A * (1 – R)n
Thus, the total loan amount is:
T = A*(1 – R)1 + A*(1 – R)2 + A*(1 – R)3 + …
T = A * [ (1 - R)1 + (1 - R )2 + (1 - R)3 + ... ]

Mathematics says,
x1 + x2 + x3 + x4 + … = x / (1-x)
T = A * (1 – R) / R

How much money have our banks loaned out using the Rs.100 deposited initially? Using the above equation, this would total up to 100 * (1 – 0.1)/0.1 = Rs.900.

In this entire process, to find the total amount deposited (D), we need to take into account the initial Rs.100 too.
D = A + T
D = A + [ A * (1 - R) / R ]
D = A * (1/R)

Which, for our example, will total to Rs.1000.

The cash in reserve for any period is:
R * A * (1 – R)n-1
Total reserve is:
( R * A ) [1 + (1 - R)1 + (1 - R)2 + (1 - R)3 ... ]
which simplifies to A = Rs. 100

The Balance Sheet: This is how the combined balance sheet of the Banks will look like:
Bank Liabilities-Deposits Assets Credits Reserve Total Assets
Bank_1 100 90 10 100
Bank_2 90 81 9 90
Bank_3 81 72.9 8.1 81
- - - - -
- - - - -
Bank_n 00 00 00 00
Total 1,000 900 100 1000

Such is the power of this simple process that banks have created an asset of Rs.1000 using an initial money of Rs.100. In other words, Banks have created money. This type of banking is called “Fractional Reserve Banking”

Why does this process succeed? This process succeeds because most money transfers today do not involve cash or currency. It involves just cheques, Direct Debit, etc. or electronic transfer – mere numbers on a computer screen.

When would it fail?
This system fails in two main cases:
Cascade of withdrawals - When all depositors come asking for their money back at the same time. The banking system will not have enough currency to meet the demands. In fact, one main purpose of the CRR is that the banks must be able to repay deposits when there are significantly large number of withdrawals.
Loan defaults - What would happen when the debtors default or fail to repay the loans? This would also result in banks having insufficient money to pay back depositors.

The financial system is much more complicated than what we have discussed. But the above two are one of the basic reasons for the recent recession – just that it involved a cascade of selling stocks on the market, and defaults of subprime mortgage loans.

The above described correctly how the banking system as a whole (but not a single bank on its own) can, on the assumption of a 10% cash ratio, eventually make loans totaling Rs 900 from an initial deposit of Rs 100. What is misleading, however, is saying that this means that "banks create money out of thin air". They are lending out only what has been deposited with them (in fact only 90% of this). What is happening is that the initial deposit of Rs 100 is being continually recycled in the form of new deposits. You yourself actually state this yourself when you say total loans amount to Rs 900 and total deposits to Rs 1000:
How much money have our banks loaned out using the Rs. 100 deposited initially? Using the above equation, this would total up to 100 * (1 – 0.1)/0.1 = Rs. 900. In this entire process, to find the total amount deposited (D), we need to take into account the initial Rs. 100 too.
D = A + T
D = A + [ A * (1 - R) / R ]
D = A * (1/R)
which, for our example, will total to Rs. 1000.
In other words, total loans cannot exceed total deposits. What banks are doing is creating loans not out of thin air but out of the money deposited with them.

As it happens, an article Financial Times confirms that banks can only lend money they've already got (either from their own capital and reserves or from depositors or what they have themselves borrowed from the money market):
"Yesterday, the CML [Council of Mortgage Lenders] warned that its own members - who make roughly 94 per cent of all the mortgage loans in Britain - are facing higher costs as they compete for retail deposits to replace maturing wholesale loans. This is likely to mean that rates on mortgages may have to rise even if the Bank rate remains on hold." What is happening is that money which the banks have borrowed from the money market is due to be repaid soon and they are seeking alternative sources of money to re-lend, from depositors. To attract depositors they have to offer them a higher rate of interest. Which means that, to make a profit, they will have to charge a higher rate of interest too to those they lend money to. Banks make a profit out of the difference between the rate of interest at which they borrow money and the higher rate at which they re-lend it. If they really could create money to lend by simply monetarising what a potential borrower would owe them they would never be in the position reported by the Financial Times. But they are.

Banks, in pursuit of profit, have every incentive to make as many loans as they can (since the more loans they make the more income they stand to get as interest) and that in recent years they overdid this by creating all sorts of complicated and dubious loans financed by money they had borrowed on the money market. This all came unstuck when the US housing construction sector "overproduced" houses (in relation to paying demand, not real need, ). That's the way capitalism works. In a boom every capitalist enterprise (banks included) tries to make as much profits as they can. Then one sector overproduces and this has a knock-on effect on the rest of the economy. This happens every time and there's nothing governments can do to stop it. That's one reason why we've got to get rid of capitalism and its production for profit and replace it with socialism and production directly for use.

If you just abolished the Fed and brought in a different monetary system this would still leave corporations owning and controlling productive resources and using them to generate a profit rather than to directly satisfy people's needs. So world poverty, pollution, wars, waste, etc that arise from the competitive struggle between profit-seeking corporations would continue. No monetary reform can change this. Rather than thinking about new banking structures, surely the most urgent need is to get rid of capitalism (of which banking is just a part) altogether! A fundamental point is that it's not "greed" which has caused this crisis, it's capitalism. Crisis is inherent to capitalism and the only way to have a world without crisis is to have a world without capitalism. That means consciously dismantling capitalist social relations: money, commodity production, wage labour, national frontiers and ... banks!!



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