I like your pink-green-purple-white arrow system, which incorporates the double-entry accounting concepts (pink-green) used by Richard Werner.
Don’t compromise your system's usefulness by accepting banker’s jargon on “deposits” and “loans”. Sloppy definitions belong in Wonderland, where words mean whatever Humpty Dumpty says they mean. Be precise, and accurate as well. I call their jargon words "Trojan Mind-worms". If you “stick with” them, I'm afraid you will have fallen for one of their “magical deceptions”.
Also, I think you need to include in your repertoire the simple accounting fact that it’s not possible to “lend a liability” the way you can lend an asset. Even the Bank of England admits this fact, which is the subject of my article #4 The Bank of England exposes the illusion of bank "credit-lending" (substack.com).
Thanks for the comment! It took me years to come up with the arrow notation, and once I'd settled on it, it helped me to start seeing the economy as transfers (and creation and destruction) of RNW.
I don't much like the terms "deposits" and "loans" as used in banking, but they're so entrenched that I think it's important to follow the convention, otherwise people who read this substack could find other authors' work harder to understand. I strongly agree we need to guard against deceptions, and I'd say the best way to do this is to understand what is happening to each party's assets and liabilities (and therefore raw net worth), which is where all my focus is.
By the way, have you considered how the bank's and borrower's assets and liabilities would change if, instead of the bank just creating a "deposit" for the borrower, it transferred cash to the borrower, and the borrower immediately deposited the cash with the bank until they were ready to spend it? I can highly recommend doing that exercise.
To me, the expression "lending a liability" would mean temporarily transferring an existing liability from one person to another. While in principle that could be done, it would be very unusual, and I agree that's absolutely not what's happening in banking. Nowadays I would just say, like Perry Mehrling of the Money View school, that lending is a swap of (newly-created) IOUs.
You seem to have missed my point regarding "lending a liability". It’s not only “not unusual”, it IS the present *modus operadi* of banks world-wide. That’s why I brought it to your attention.
Although current “bank-lending” is – as you say - actually a “swap of (newly-created) IOUs”, that is not what appears in the accounting records of banks. I’ve recently published a series of Substack articles (#2, #3 & #5) containing details of actual bank customers’ accounts which show how banks record their “money creation” transactions in the process of granting new “loans of credit”, and it’s worse than you might imagine.
To summarize: when a bank pretends to “lend” you the “liability it creates in its books”, it is lending you what you already OWN, as a creditor. They’ve converted an actual “IOU swap” into a “fraudulent asset grab” and have the gall to claim interest on the full commercial value of the asset they’ve just grabbed: the customer’s promise-to-pay.
Richard Werner suspected this accounting process was fraudulent, but my evidence proves it. How a bank conceals this crime is what I’ve been working to expose. They use what I’m calling “word magic”: while correctly recording the accounting NUMBERS to represent the actual “IOU swap”, they use WORDS in those accounts which CONTRADICT what the numbers show.
I believe your excellent arrow-system will be the ideal mechanism to describe and explain this accounting fraud very efficiently and clearly. Hopefully, your arrow-descriptions will be much easier to follow than my clumsy word-pictures.
I like your pink-green-purple-white arrow system, which incorporates the double-entry accounting concepts (pink-green) used by Richard Werner.
Don’t compromise your system's usefulness by accepting banker’s jargon on “deposits” and “loans”. Sloppy definitions belong in Wonderland, where words mean whatever Humpty Dumpty says they mean. Be precise, and accurate as well. I call their jargon words "Trojan Mind-worms". If you “stick with” them, I'm afraid you will have fallen for one of their “magical deceptions”.
Also, I think you need to include in your repertoire the simple accounting fact that it’s not possible to “lend a liability” the way you can lend an asset. Even the Bank of England admits this fact, which is the subject of my article #4 The Bank of England exposes the illusion of bank "credit-lending" (substack.com).
Thanks for the comment! It took me years to come up with the arrow notation, and once I'd settled on it, it helped me to start seeing the economy as transfers (and creation and destruction) of RNW.
I don't much like the terms "deposits" and "loans" as used in banking, but they're so entrenched that I think it's important to follow the convention, otherwise people who read this substack could find other authors' work harder to understand. I strongly agree we need to guard against deceptions, and I'd say the best way to do this is to understand what is happening to each party's assets and liabilities (and therefore raw net worth), which is where all my focus is.
By the way, have you considered how the bank's and borrower's assets and liabilities would change if, instead of the bank just creating a "deposit" for the borrower, it transferred cash to the borrower, and the borrower immediately deposited the cash with the bank until they were ready to spend it? I can highly recommend doing that exercise.
To me, the expression "lending a liability" would mean temporarily transferring an existing liability from one person to another. While in principle that could be done, it would be very unusual, and I agree that's absolutely not what's happening in banking. Nowadays I would just say, like Perry Mehrling of the Money View school, that lending is a swap of (newly-created) IOUs.
You seem to have missed my point regarding "lending a liability". It’s not only “not unusual”, it IS the present *modus operadi* of banks world-wide. That’s why I brought it to your attention.
Although current “bank-lending” is – as you say - actually a “swap of (newly-created) IOUs”, that is not what appears in the accounting records of banks. I’ve recently published a series of Substack articles (#2, #3 & #5) containing details of actual bank customers’ accounts which show how banks record their “money creation” transactions in the process of granting new “loans of credit”, and it’s worse than you might imagine.
To summarize: when a bank pretends to “lend” you the “liability it creates in its books”, it is lending you what you already OWN, as a creditor. They’ve converted an actual “IOU swap” into a “fraudulent asset grab” and have the gall to claim interest on the full commercial value of the asset they’ve just grabbed: the customer’s promise-to-pay.
Richard Werner suspected this accounting process was fraudulent, but my evidence proves it. How a bank conceals this crime is what I’ve been working to expose. They use what I’m calling “word magic”: while correctly recording the accounting NUMBERS to represent the actual “IOU swap”, they use WORDS in those accounts which CONTRADICT what the numbers show.
I believe your excellent arrow-system will be the ideal mechanism to describe and explain this accounting fraud very efficiently and clearly. Hopefully, your arrow-descriptions will be much easier to follow than my clumsy word-pictures.