The expansion of bank credit was traditionally controlled by imposing a lending ratio of about deposits x (a figure less than 12). This was broken in the 1980s but there had long been ‘back doors’ eg the secondary banks. The underlying issue is abuse of credit, the proper purpose of which is to support production eg the farmer must live until the crops are harvested and sold; the shipbuilders’ wages and materials must be paid for while construction is taking place. At the end of the process, the credit is extinguished.
However, most credit these days is money created, without limit and at zero cost, for the purchase of land (embedded in real estate eg houses). No additional production takes place and there is no increase in productive capacity. The bank is effectively the landlord for the duration of the loan, and what is labelled ‘interest’ is in reality rent. The banks have thereby transformed themselves into land speculators, and as with all speculative activities, there are periodic busts. Unless there is a direct tax on land, assessed on its rental value, the problem will just go on getting worse
Inga kommentarer:
Skicka en kommentar