write a samll essay on the topic "ban money"
Answers
Explanation:
On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. ... But the banknotes that were not deposited were worth ₹10,720 crore (107.2 billion), leading analysts to state that the effort had failed to remove black money from the economy.
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Under the existing bank system, a private / commercial bank, when granting a loan, does not need to get the relevant money from anywhere: it can simply produce the money from thin air. See Bank of England article, entitled “Creating Money in the Modern Economy” for confirmation of that point.
If you think that amounts to counterfeiting, then you’re not the first to think that: the French Nobel laureate economist Maurice Allais thought likewise (see article entitled “Credit Markets and Narrow Banking” by Ronnie Phillips).
There is however another reason for banning money creation by commercial banks which seems to have been largely or totally overlooked in the literature, which is as follows.
When a commercial / private bank creates new money and lends it to sundry borrowers, that money gets spent: after all, there’s not much point in borrowing money unless you spend it on something. For example when someone borrows money to buy a newly built house, their money ends up, at least initially, in the pockets of the construction workers, brick and cement manufacturers etc.
On the simplifying assumption that those workers and manufacturers simply bank their newly acquired money and don’t spend it, then in effect, those workers etc have granted a loan to the house purchaser. And those workers will earn interest on that money, especially if they put it into term accounts.
Of course in the real world the latter workers and manufacturers will spend their money fairly quickly, thus the money quickly gets dispersed among THOUSANDS of people. But the above point remains: those thousands of depositors have made a loan (via a bank) to the house purchaser. In short, those depositors are money lenders: they are into COMMERCE.
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