"Banks lend by creating credit.
They create the means of payment out of nothing."
by:
Ralph M. Hawtrey
Former Secretary of the British Treasury
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Reader comments about this quote:
 -- Joe, Rochester, MI      
5 stars for accuracy, thumbs down for what its done / doing to the US and world economies.
 -- Mike, Norwalk     
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    What a lousy quote! This dimwitted structured sentence says NOTHING, no wonder Mike fell for it. Lets analyse it. "Banks lend by creating credit" could be reverse by saying "banks create credit by lending". Lending and credit are one and the same thing, so this phrase is meaningless. "They create the means (lending) out of nothing (credit)" I guess is what this clown is trying to say. It is BS. When a bank lends they reduce their Cash on Hand (credit cash) and increase Loans To Customers (debit). If they do not have enough cash on hand they may borrow the cash from The Fed in which case they would increase a liabilty Loans From Fed (credit) and an asset Loans To Customers (debit). No stars for nothing especially accuracy, it is a total flop and a disservice for liberty-tree to print such drivel. And no wonder Mike falls for such garbage every day.
     -- Waffler, Smith     
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    Waffler never gets it.
     -- jim k, austin     
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    could be reverse by saying "banks create credit by lending". .....By Lending What? Nothing! Paper..that's it. Your hard work for Paper. Paper that the state can devalue at the drop of a hat. Paper that will hold no value the day the state decides to exert control. Wake up Waffler...its a system of slavery.
     -- J Carlton, Calgary     
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    People not getting the significance of Hawtrey's quote should try and grasp the fact that previously NON-existent CASH is CREATED by the central bank whenever a loan is initially made. This is the essence of fiat currencies and precisely why every single one of them has ultimately returned to its inherent value, zero. The primary advantage of such a "flexible currency," one not directly tied to bullion, can be found in a quote by the founder of the Bank of England, William Paterson: "The bank hath benefit of interest on all moneys which it creates out of nothing." The power that comes with the ability to create money sweeps away constitutions, democracies, and public legislative powers.
     -- J.L. Mann, Kalamazoo     
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    This is the sleight of hand that the bankers have used to steal the labors and property of the people. Waffler, there is a simple difference between 'lending' and 'credit.' If I have a car and I lend it to you, you have the car and owe it back to me -- I do not have the car when you have the car. Now let's say you want to buy the car but you don't have the money right now, so you give me an IOU for the car. By accepting the IOU I am extending you 'credit' -- that is to say you are making a 'promise to pay' (the IOU) and I am 'trusting' you to honor your promise to pay else I get the car back and you get your IOU back. A 'loan' involves something that already exists, 'credit' is to accept a promise that something WILL exist in the future to 'pay' for something that exists now. Now let's say I would like to buy another car -- will anyone else accept the IOU I have from you in lieu of cash? Maybe, but I cannot force them, but if you can be 'trusted' because you earned good 'credit' by keeping your promises, then maybe your IOU would be as good as cash itself. BTW, this process can never be prevented -- it is the right to make contracts. Here lies the rub. When banks issue you credit, an IOU (promissory note) is drawn up -- essentially you promise to pay in cash at a future date the amount you would like to 'borrow' from the bank. Here is where Waffler is wrong: the bank does not have the 'money' for the IOU -- the IOU IS the money -- it is a cheque, a bank note, that other banks will honor. In other words, the bank has turned your promise to pay into money itself. In official terms it is called 'monetizing debt.' BUT here is the con (because so far this process isn't so bad, right?), the bank charges compounding interest on the amount of credit extended. In other words, they are charging interest on NOTHING. Now when you pay me for the car with cash, I give you back your IOU (promissory note) and it is torn up. What we have done is create money (a medium of exchange) when making the promise to pay (the IOU) and destroy the money when the promise has been fulfilled. Now, today, this process of money creation/destruction is performed by every bank in the country, some of which may only create $100 for every $15 on deposit (called a 'reserve') -- some banks, like Goldman Sachs have NO RESERVE and can create as much money as they can 'lend' and it should be no surprise that Goldman Sachs has now bought up most of the failing banks -- with unlimited money creation ability, it is only a matter of time before the bank is able to either get the property that has 'secured' these 'loans' or gets real cash and interest for merely creating the money in the first place! See if you can wrap your head around this, Waffler: what we call 'money' today are in fact promissory notes -- they are called Federal Reserve Notes. The Federal Reserve will issue FRNs in exchange for promises to pay from the US government, called Treasury Bonds or T-Bills. The Federal Reserve Act authorizes the Fed to buy T-Bills with Federal Reserve Notes that they themselves issue. Imagine if there were an entity that could make its own money and buy government T-Bills to the point the government would owe $1 trillion dollars to them PLUS INTEREST for something they just made up out of nothing -- this is what the Fed does, and it is a PRIVATE company, it is not federal and it has no 'reserves' just the right to buy T-Bills with a piece of paper with no backing at all. THIS is a crime against humanity itself -- it is permanent economic slavery. If the banks create enough money we can trade, if there is not enough money in circulation (as when people stop borrowing and start paying back and thus the money is destroyed) then we starve. Every single 'dollar' (so-called) in circulation whether in bills or cheques has been 'loaned' into existence -- it did not exist before it was borrowed and it will not exist once it is paid back. <-- This should rock the world of everyone who thought that a bank lends the money depositors have put in the bank -- they don't!! Banks 'lend' by creating credit. They create the means of payment out of nothing.
     -- E Archer, NYC     
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    If I lend you $100 dollars, I will have you sign a note. I have given up 100 currency and you have promised to pay it back. My cash is down my receivables are up. Now if I don't have the cash I can borrow it from another guy, I would then have a debt owing to the other guy and a debt owing to me from you. Substitute me, you and the other guy for banks, federal reserve etcetar there ain't no difference. I assume all the folk who fall for this drivel have never had a lick of bookkeeping or accounting but who needs it this simple crap and you can't get it.
     -- Waffler, Smith     
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    "Government is the only agency which can take a valuable commodity like paper, slap ink on it and make it totally worthless" ~Ludwig von Mises
     -- J Carlton, Calgary     
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    Waffler, you can only lend what you already have. The 'creation' of money occurs when a bank writes a cheque to someone in exchange for their promise to pay it back -- THE MONEY THE CHEQUE REPRESENTS HAS JUST BEEN CREATED, the bank can 'loan' the person money it does not have!! How can they do that? By virtue of the Federal Reserve Act. Unfortunately, a bookkeeper is not taught about that... Inevitably, those with the power to issue (i.e. create) money and even charge interest on it bear no risk, and little by little acquire the real property of their customers for nothing but script. A bank 'prints' money by printing up checks that cost but a few cents but can be worth millions and millions of dollars. (Waffler, 'printing money' is but an expression to describe the creation of money which is now nothing but pieces of paper or entries in a ledger that are backed by the promise of a 'borrower' to pay it back.) Now that is printing money -- the government does it, the Fed does it, and the chartered banks under the Fed do it -- and in the end, the People inherit the debt, the inflation, the loss of purchasing power, endless taxation, loss of the fruits of labor, loss of real property, and ultimately eternal unpayable debt. THAT is communism and one of its central planks.
     -- E Archer, NYC     
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     -- Mary, MI      
     
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