Banking system perversion

The creation of money by banks - ie credit - is a necessary part of the economy and has been for hundreds of years. However, historically, it was found that the amount of credit created should be limited to about 12 times the value of deposits.
A further issue is that credit is abused in at least three ways

1. The legitimate use of credit is to finance the production of physical capital, which will thereby increase productive capacity. This is essential for an economy to function. When credit is used for land purchase, as most of it is, no additional capital is produced and there is no increase in productive capacity. It is dead credit.
2. Credit should be secured only on the goods that the credit is given for eg the part-built ship.
3. Interest should not be charged. The bank's services should be paid for by an administration charge and some kind of insurance bond, which is not the same thing as charging interest.

The banking system has been perverted. A major proportion of its activity consists of the purchase of land using money that the banks create at almost no cost, seemingly without limit. A mortgage is a device whereby the bank becomes a land owner for the duration of the loan. What is labelled “interest” is in reality rent paid to the bank. The banks have turned into rent-seekers.
The solution to this, as to many other chronic economic ills, is land value taxation, which collects land rent as public revenue, taking it out of the hands fo rent seekers. As a bonus, most other forms of tax can be abolished.