Wednesday, November 16, 2011

I Suppose Savings Accounts Are Okay

I recently wrote again about Social Credit and how our modern fractional-reserve debt-money system of private credit creation (at interest!) is intrinsically usurious and the cause of all the economic inequality in the world.

This position used to lead me to believe that having a savings account and collecting interest was participation in usury and wrong. However, as I was thinking after Mass today about how the Master/King in the Parable of the Talents says, "why then didst thou not give my money into the bank, that at my coming, I might have exacted it with usury?" and I changed my mind about savings accounts exactly because of the fact that, I remembered: the relation between deposits and loans is illusory! In modern debt-money banking the loans aren't coming from your deposits in the first place. The money is literally loaned into existence. The deposits, at best, serve as a sort of legal benchmark (the "fractional reserve") for how much new money the bank is allowed to loan into existence (a limit increasingly reduced to insignificance).

So too, the "interest" paid to savers is not directly connected to the interest collected on loans (though an illusory connection is suggested to a naive public). The interest paid to savings account holders is not "your share" of the profits the bank makes from lending from its deposits. It's not that this is the share of the interest you get in exchange for letting the bank lend out your money, because the bank doesn't really lend out your money (if that were the case, you wouldn't be able to withdraw your money, or at least not all of it, at once or without prior notice, as it might be "out on loan.") A "run on the bank" is no longer really an issue, or if it is it's for different reasons. All your "gold" is still safely in the vault and available for withdrawl, the loans are not from deposits.

And the corollary to this is that, likewise, your interest in a savings account is really not particularly causally related to the interest the bank collects on the new debt-money it loans into existence. Really, your interest in a saving's account is a token amount that comes from the bank's same money-creating power. And unless you want to argue that spending Federal Reserve money (or any debt-based monetary unit or species of credit) is sinful, neither can merely having a saving's account be accounted as such.

This is sort of like Aquinas's argument that only the lender sinned in usury, I guess. I also thought this article from the Summa about different kinds of consideration for money "lent" are usury and which weren' very interesting. Although he is still clearly making assumptions about the economy that are medieval (and thus not necessarily true in the modern economy), if you read the objections and replies carefully, he actually approves of several things that some people use to argue that usury is okay (but which aren't really usury; such as, for example, expecting a share of the profits if one "lends" to a merchant or craftsman, which is really investment and not lending).

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