Hud955
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I also agree that this thread be split, so that the discussion on censorship can be continued elsewhere. Can I also suggest, steve, that though I think you are making a valid contribution to this particular issue, and I understand that you want your view to be heard, this is not the place to deal with the matter. No balanced judgement is going to come out of an ongoing on-line debate like this. It is likely just to drag out the matter and in the end no-one will feel satisfied. If you talk to Socialist Punk regularly and have contacts with some of the others involved, I'd suggest you get together and put your complaints to the internet committee, then to the EC, if necessary, so that this can be considered thoughtfully, and at a lower temperature. If we can resolve this properly we might even learn something useful from it.Cheers.
aden wrote:I think Ed is being a little paranoid. Let me explain. I was a member of the labour party for some years but left. Mainly because of favouritism. You were not allowed to challenge party officers for example, nor show any serious disagreements. This is why I found the SPGB so interesting. I have been reading the Standard and the website. The idea of a party without leaders and fovourites sound better than the Labour elite.That is why I am interested in and disappointed with this forum but thankyou for your time anywayLOL. Hi Aden. You clearly don't yet understand the SPGB. (How could you?) It is arguable that challenging 'party officals' is what SPGBers do best. We are always at it. It's because we don't have a leadership structure and mistakes or bad decisions are sometimes made that there are well-established routes through which challenges of all sorts can be made. Those involved in this row have repeatedly been advised to make that challenge by other members. Personally, I'm really hoping they will as this situation needs to be resolved fairly and we can all learn something useful from it. Cheers
What's the purpose and valid function of a internet forum for a democratic organisation like the WSM. It could be argued that, because we do not believe in censorship, any forum that we provide should be open to anyone to publicly discuss anything they want in any way that they want. We could provide a forum like that, but I don't see our principles obligate us to it. It would be absurd, for example, to claim that we were censoring people if we chose not to provide them with a public forum to use as they wished, especially as the opportunity to discuss any subject imaginable is available to anyone who has access to the web.The WSM's single purpose is to develop an understanding of socialism, so it is perfectly reasonable that any forum we set up should be dedicated specifically to socialist discussion, and equally reasonable, given that we are a democratic, non-leadership organisation, that we should invite anyone who wants, to join the debate. It was set up for members to discuss the case for socialism with others. The fact that most people here have accepted that this is the purpose of this forum, shows the reasonableness of this position, I think. The SPGB set the forum up, then, with two purposes in mind: to promote the idea of socialism and to provide an arena in which anyone can examine and test the socialist case. It would be wholly against our principles and purposes to censor or eliminate discussion of any idea that was even remotely related to our position. Censorship of ideas and arguments is unacceptable. Dealing with the behaviour of members who disrupt that process either by straying off the subject, indulging in personal feuds or riding particular hobby horses to death is different. I would be very concerned if McDonah and Bob were expelled from the WSM site because they expressed views that were contrary, or in some sense 'inappropriate' to the socialist case. If they were banned for disagreeing with us, it would suggest that the WSM was attempting to assert its case by avoiding criticism or argument. It is my understanding, however, that McDonah and Bob were banned from posting on the WSM forum because they were simply repeating the same material over and over again, and contributing nothing new to the debate. It certainly sounded like it whenever I looked in. I cannot see any valid claim of censorship here. Anyone who wants to see their arguments against the party case or the responses made by party members and others, can go along to the site and look them up. They are still all there – in repetitive detail. But a point had been reached long before they were banned when the sole contribution these two were making was to deter others who might otherwise had made a valuable contribution to the debate. They had more than their fair share of opportunity to make their case to us and failed to convince us. If Bob and McDonah want to repeat their arguments to others and try to convince them, then once again ample opportunities are available to them.As for the recent feuding on the SPGB site, I’m not going to say too much about it as I wasn’t involved and have only read through the posts once. What I see, though, is a classic example of a group of forum contributors who gradually managed to wind each other up with sarcastic, defensive and dismissive remarks until one of them lost his rag and went way over the top. It happens all the time on the web. And I don't believe any one person was responsible. I’ll leave aside the arguments and accusations about whether the moderator made a mistake in banning them or acted fairly in accordance with the rules of the forum. I don't want to make that judgement. There is an established process for dealing with that with built-in democratic accountability. But some kind of moderation is necessary in situations like this, even if it means temporarily banning members from the site until they have cooled down. When they come back they will have a continuing opportunity to put their views, so again, I cannot see that any censorship has taken place. There are some issues about how the forum should be moderated, I think. The party needs to discuss this further through its normal democratic processes, and come up with some clearer guidelines. That way, every contributer will know exactly what is expected of them and the moderator can be confident about his response. People are responsible for their own ideas and beliefs about socialism. When they come onto a forum like this they are entitled to freely express them. But it can't a free for all – that just leads to chaos. Censorship has everything to do with stifling or preventing debate. It has nothing to do with the necessary process of managing people whose contributions are no longer reasonably focused on that debate.
I think it's ironic that we often used to be contrasted with left wingers who, it was said, insisted on a rigid use of Marxist or sub-Marxist jargon. The SPGB, on the other hand, had the reputation of putting the socialist case in an English that any working man or woman could understand. So what happened? Did we fall in love with jargon, or as Adam suggests, did the language of political discussion in the pubs change and leave our 'plain English' style sounding pompous and obscure. I agree, we were right to keep things simple. After all, wer'e not a democratic centralist organisation – a secret cabal that needs a private language to maintain solidarity and confuse our footsoldiers, but an open democratic organisation whose only reason for existing is to help fellow members of the working class understand more clearly their experience of capitalism. I'm all for plain English when it's appropriate. But I also fully agree with Ed when he argues that we have to be able to put the case in a number of different dialects (because I think that's what they are), both as individuals and as a party. We need to remember, I think, our definition of the working class: wage *and* salary earners. Many of today's working class have been through the mills of higher education and come out the other end with diplomas and academic degrees and they are not impressed by simple ideas or by plain expression. In my home town I'm more likely to find myself talking socialism to an engineer or an accountant than I am an office administrator. (Funnily enough, I keep bumping into philosophy graduates – now there's a breed of jargoneers). We need the skill to be able to switch back and forth as necessary.And I also think we need to maintain a strong theoretical understanding of the socialist case because ultimately that's what defines us and our activities. It's our theoretical position that gives us our understanding of what socialism is and helps us clarify what we need to do to get there. Our plain English rendering of the case should be a version of theory; we shouldn't be cobbling together theory out of simple ideas. That's a hard call. But I think we're up to it.So, I guess I sit somewhere in the middle of this debate. As for driving people away with our hostility – I think that's right, we often do. And why that is I can't fathom. I think it is too easy to put it down to individuals. I see people winding each other up while discussing socialism so frequently. Are we so much worse at this than other politically engaged organisations? Is the internet contributing to it? It's so much easier to misunderstand or give offence on the net that in any other medium. Or is it the nature of our case? I have no idea.
Hi allI'm sitting here in front of my laptop putting a few finishing touches to the workshop programme on the 20th. Is anyone here coming? We don't have a lot of time at this first event for discussion (I hope it will be the first of a series), so I want to use it to gather together as many ideas as I can – what members think we should be doing, what resources we need to do it, what we are doing wrong at present, where should we be focusing our effort, what media should we be using, and so on. I'm planning this as a major brainstorming event. It will be a very active and structured session. If you are coming, I can guarantee to keep you busy. You won't be sitting around much scratching your head. When we are all done I'll post up the results on SPINTCOM. We'll then need another session to push your ideas further. But then, we'll need to stop talking and start doing. At that point, I'll be bringing everything together to produce a plan of action. At the session, I'll be asking fifteen questions that I think are relevant to the whole issue of how we are seen and how we get our message across to the working class. I'm nearly settled on what those fifteen questions are but am still wide open to suggestions if someone can come up with something vital that I've missed.So any ideas for a really penetrating brainstorming question to hit the membership with? Let me have them? I'm all ears.I'm willing to stay late on the 20th if people want to continue beyond the advertised time. And I'm also happy to organise further sessions (face-to-face or on-line) as needed. I've had a talk with Brian and a couple of other people about possible ways to get this show on the road, and there are lots of good ideas coming in. Keep them coming.CheersDick
Hi Robin and everyoneHistorical materialism is just as antithetical to the concept of god as metaphysical materialism. If all human ideas emerge from material conditions, then that is where the idea of god originated too. But aren’t there two prior questions? 1. Should we assume that all party members believe in socialism for rational reasons, and 2. does someone have to subscribe to the materialist conception of history to be a socialist? Frankly, I think the answer is no on both counts. I’ve known people within the party say, for example, oh I can’t be bothered with all that intellectual stuff, I’m just a gut socialist. We are perfectly willing to accept gut socialists into the party so long as they give give the right answers to the basic questions. And so we damn well should! But heaven knows (!) gut socialism is no more rational than a belief in the creator. Then, I have a strong suspicion that a lot of members come to hold certain beliefs because when they enter the party, that’s what the party orthodoxy says. They take them on trust and assert them but if asked to defend them, wouldn’t be able to. I know that to be true of some ideas for some people, including, if I’m honest, me (though I’m gradually working on that. LOL). How many people within the party who say they subscribe to the Labour Theory of Value would be able to defend it rationally, for instance, against its many objectors? It’s a complicated argument. How many members would even know what it was? It is open to a multitide of interpretations. How many members who cheefully claim that currency crank theories of money are nonsense and talk demeaningly about those who defend them would be able to give a detailed and rational analysis to support their view? There are loads of areas where members clearly take certain views on trust or have only a hazy understanding of them. And how many irrational beliefs do many of us hold in our daily life anyway. Probably far more than we would be prepared to acknowledge. I think we kid ourselves a lot of the time that we are these perfectly rational beings. Why would we be?. We don’t, after all, have a god’s eye view of reality and we have to deal with a complicated world. We don’t have time to have detailed, reasoned, empirically supported views on everything we need to make decisions on. Life is too short and far too occupied with wage-slavery. I would object to giving membership to anyone who was a member of a religious organisation or subscribed to the beliefs of a religious organisation. That’s simple, there would be a direct or potential conflict of values there. But I’m not sufficiently purist to believe that someone who simply has a belief in a creator could never be a conscious socialist. That’s because I don’t believe that a carefully reasoned belief system is what defines a conscious socialist. A conscious socialist, in my book, is someone who identifies with working-class class interests and works for the introduction of a common ownership, post-capitalist society. If anyone believes that religion and belief in a creator are going to disappear at all soon among the working class, then, personally, I think they are going to be disappointed. If a socialist movement ever does get off the ground then we are going to have to work with socialists who believe in a creator or even have religious views. That’s something we will have to face. We constantly side-step this issue. How rational is that? Whether we should accept people as members who believe in god but don’t subscribe to any religion – well, I struggle with that. On balance I think I’m against it – very reluctantly. I’m really quite sympathetic to many of Robin’s arguments on this. He makes some very good points. Yet, still I think it would cause us big problems. But one thing I feel certain about. I don’t think we should be denying them membership for purely philosophical reasons. That really would turn us into something of an elitist cult. But to admit people with a belief in a creator, all kinds of practical questions and problems would arise. If we did, then there would be no question of this being ‘a private matter’. Being a socialist is above all a social act and that would have to take precedence over everything else. Would we demand to know what conclusions they drew from their belief or what were their associated idea? Would we be able to preserve a purely atheistical stance in our propaganda? Would we want to? If so, would we, then, have to ask members who believed in god not to promote that idea when speaking on behalf of the party? How many would want to join under those circumstances. I think it could get very, very complicated.We have someone on the forum here who is a committed socialist but also believes in a creator. Can we not ask him to engage open-mindedly and honestly in this debate without defensively attacking his views? I think it is an important one for us all.
Because, one day (quite soon) it would be – once the powers of production had been raised to an adequate level. In the meantime other measures could be taken (so M and E argued) hence the interim arrangements proposed in section three of the Manifesto.
Jonathan Chambers wrote:If you don’t think that wrestling someone to the ground – often using enough force to cause injury – and relieving them of their possession is an act of violence then we are clearly using language in a very different way…
The rest of your posting, hud, consists largely of strawman arguments that do nothing to attack my position which, I have to say, I obviously haven’t made clearly enough to be understood. Which is odd, because it’s really a very simple point I’m making. What I’ve referred to as a predilection towards violence – and our aggression as a species along with our prehensile thumbs is one of the things that has ensured our survival as a species – is as much a part of us as our ability to co-operate.I think you are using the word ‘violence’ very loosely in the context of rugby, Jonathan. Violence does not just mean physical force (which is certainly employed on the rugby pitch): it implies physical force used with the intention of injuring or intimidating another person or of destroying property etc. And it carries a strong implication that the physical force used was excessive, unjust, unlawful or inappropriate to the circumstances. None of that applies to the normal use of physical force within rugby. We need to be careful about the use of language in discussions of this kind because sliding over important distinctions has always been a technique used by those who want to make the case that humans are some kind of pre-programmed killing machine.
No, you are making yourself very clear. Perhaps I’m not. I’m objecting to your very specific claim that human beings have a predeliction towards violence. I’d certainly agree that human beings have a capacity for violent behaviour (that could hardly be doubted), and I certainly wouldn’t dispute the idea that under certain circumstances it’s a behaviour that has suvival value, but that is not at all the same thing at all. A prediliction implies a preference or bias. There is no evidence for this at all in human beings. Again, if this is not exactly what you mean, then we need to clarify that.
My concerns about ‘fight or flight’ are relevant in this context. Actually, four behaviours are recognised in human beings and primates (and some other social mammals) that occur in response to a perceived threat from within one’s own species – fight, flight, posturing and submission. No-one has ever suggested that human beings have a predilection for the first of these.OK, make way, I’m head down and getting into the scrum here.
No, rugby is not ritualised violence: it is a ritualised means of promoting and developing co-operative/competitive behaviour that occasionally produces violent episodes, but actually, remarkably few. (And I speak of someone who was forced to play rugby at school every day for years and, as a skinny oik without any natural padding, hated every moment of it.).
No-one believes any more in a simple dichotomy between nature and nurture, or between a genetic predisposition and our enviornmental/cultural influence. It is now understood that the interactions between our genome and our environment are much, much more subtle than that. And even putting those complexities aside for a moment, no ethologist believes that you can characterise conflict interactions within species simply in terms of fight or flight. We have, at its very simplest a fight/flight/conciliation ‘mechanism’. This can be seen all the time in any social species. And other behavioural options for our species have been identified too.
Now look at the language here:
“Of course, a sensibly organised society will make it easy to ritualise this built-in drive so that it can manifest itself in safer, more controlled ways.”
What, built in drive?. This suggests that the so-called “fight or flight mechanism” is somehow lurking there within us, an engine constantly revving away, just waiting for an opportunity for a punch up. That’s nonsense. People who make this kind of assertion are often just reflecting their own personalities… Just generalising, Jonathan.
Some blokes do like a fight down the pub, especially after a few pints, but to pin this behaviour on some simple biological mechanism is to argue too much.
There are some people who like to fight and some who don’t. There are some hunter-gatherer societies with high levels of internal violence and some that have next to none. Almost all collective violence that we observe is property related. Even in hunter -gatherer societies collective violence normally exists on the property boundaries. (I also understand that violent behaviour in some hunter-gather people is now believed by some anthropologists to have evolved after contact with Western cultures.)
I don’t imagine that a socialist society would be entirely without conflict, but I think this simple idea that vilolence is ineradicably built into us as a form of behaviour that must necessarily manifest itself is just not sustainable.Hi Adam
On your first point, I’m not sure it matters. If you extend the scenario beyond the simple model presented to talk about all actual loans and deposits a real bank might issue and receive (not just the £4,000 ‘created out of nothing’ as mentioned), it still has to balance its books at the end of the day. Deposits arising from loans made ‘out of thin air’ would necessarily form part of that. If it received a total of £x deposits from loans that were backed by previous deposits and £y deposits that were not, it would still need £x+£y depositsat the end of the day to balance £x+£y loans, at least if it is not to have to go to the money markets etc to settle with other banks. The logic is the same in the aggregate as it is for the limited model.
I agree with your second point but the NEF model relies – has to rely – on banks managing their accounts so over time inter-bank balances tend towards zero. Banks that persistently lend only at the expense of borrowing at interest from the Bank of England etc are eventually going to be squeezed out of a competitive market.
Edit – Sorry, not sure if the above was clear, I knocked it off quickly before hurrying for a train. This might be a bit clearer (for me as well.)
If a bank has a net deficit at the end of each day it needs to fund its BACS payments by borrowing, but these borrowings don’t balance the loans they have mad: they are merely required to transfer them from the loan account into a new deposit account. You can see that by considering the situation of a deposit that came back into the same bank that lent it. No balancing BACS payments and therefore no borrowing would be necessary. Looking at this another way. If at the end of the day bank A has £n fewer deposits than loans then it follows necessarily that at the end of the day the rest of the banking system collectively has £n loans fewer than deposits. Bank A is quids out, while the rest of the banking system, in relation to it, is quids in to the same amount. From the point of view of the banking system as a whole the only thing that has balanced the loans are the new deposits that inevitably occur (inevitably if we asume a digital transfer). But as I argued before, if the loans that were made were ‘created out of nothing’ (assuming this is possible) then the deposits derived from them would also ultimately have been ‘created out of nothing’. This has to be the case. You could not create loans out of nothing using either commoditity or paper money, and digitised loans inevitably create a deosoit for every loan, as they are simply bookeeping exercises.For anyone who has read or is reading DG’s book: Debt: the first 5,000 years, I think it’s also worth reading his reply to a review by Wayne Price on Libcom (below). I found that it clarifies a lot of points that I wasn’t sure of even though I’m reading the book now for the third time. Points 1 and 5 and his comments about a post-capitalist society I found particularly interesting.
While I understand his frustration with hostile reviewers who publicly misrepresent his work, I think DG needs to cut his readers a little bit of slack if it takes them time to get a clear handle on his views, especially those that are only implied or lightly sketched in this work. Although ‘Debt’ is very accessible, its central argument is strung out over nearly 400 pages and is sometimes obscured by the sheer wealth of anthropological detail. Like everyone else, too, Marxian socialists are going to have a platform from which they view his work and that is inevitably going to colour their reading.
Having said all that, I think this is just about the most interesting and enjoyable book I’ve read in years.
OK. Here are his comments.
“oh god here we go again.here’s the response I wrote when this first appeared in anarkismo.net
1) I do not make debt the main factor of social development. I merely make it the main topic of my book.2) that slavery and wage labor are forms of exploitation of labor is self-evident. It is absurd to say I don’t recognize it. This is like insisting that every time one mentions fascists one has to also clarify that they are right-wing.3) your claim that I don’t see capitalism as essentially a mode of exploitation of labor by holders of capital is false. If you read the book at all carefully it’s clear that’s exactly what I think. I merely pointed out that the assumption that this exploitation must necessarily occur through free wage labor is historically false. I offered this because I dreamed that Marxists analysts such as yourself might actually THINK about the implications, rather than spout doctrine about how for half of its 500 year history capitalists were somehow “preparing the way” for a system that they didn’t anticipate or couldn’t imagine at all.4) I do not say capitalism is equivalent to commercial society. I repeatedly say, as even you acknowledge, that it is not.5) I do not reject the labor theory of value. I simply note that neoclassical economists, with whom I clearly disagree on almost everything, reject it. In fact I’ve written an entire book on the labor theory of value. I simply don’t emphasize that body of my own theory here.6) I do not say that the current crisis is due to capitalism seeming eternal, I say it’s a crisis based on class struggle, following the argument of the Midnight Notes collective, a Marxist group. I state very explicitly in the footnote that you have read and cited (except only the second half) that this is the case7) I do not say that people in the ’60s thought capitalism was likely to collapse, I said that they thought the entire world was likely to blow up in a nuclear war8) I do not propose a vision for the future. I say quite specifically that I am not going to propose a vision for the future. In fact I say I am making no policy proscriptions at all other than the idea of a clean-slate. Your writing here is disgraceful and you owe me an apology. You’ve just made things up off the top of your head, based on your (almost entirely incorrect) assumptions about my politics and what you think I would envision Pure hostile extrapolations. When I say “there will always be hierarchies” I make it clear I mean that we’ll continue to stop small children from running in the street, or that there are likely to be forms of entertainment involving games and contests and some people will win. When I say “there will always be money” I say in the absolutely minimal sense that there will be some contexts in which we say “12 of those is equivalent to 1 of these.” I spell all this out pretty explicitly.9) I do not say anything, at any point, that might imply that private property in the means of production might endure in a free society. The fact that I note that in the Middle Ages, markets might have had popular appeal does not mean that I think in a revolutionary future there would be private property in the means of production, and extrapolating from one to another is nothing short of insane. Again, you should be ashamed of yourself. If you read the book, you must be aware that I have a long section where I spell out quite explicitly that the very idea of “private property” is founded on violence and slavery and that to imagine real freedom we’d have to get rid of the entire conception. This is one of the few places I do spell out what kind of future I would like to see. You pretend it isn’t there and then make up strange twisted reasons to assume I’d endorse the opposite. Again, you owe me, and more than that, the world, an apology for making such hostile misrepresentations of the book’s argument.”
http://libcom.org/library/review-debt-first-5000-years-david-graeberHi Adam
I’m running fast to catch up with all the posts now.
I’ve always assumed that what the article claims is pretty much what does happen in the real world of banks and bankers. Banks would rather borrow from depositors than the money markets because it’s cheaper and therefore more profitable, but they can and will borrow from the money markets where necessary because that can still be profitable, though less so. They can do it when access to deposits is limited or there is a run on their cash or deposits, or BACS payments, etc.
But I cannot square what you say about Positive Money with what I read in their literature. You are wrong, I think, to assert that they cannot explain, for instance, why banks seek deposits. They have what is, on the surface, a perfectly cogent explanation for it, one that I’ve been rehearsing here. Banks need to attract deposits to balance their lending otherwise they will find themselves in mounting debt to other banks through their overnight BACS payments. Once again, the argument comes down to the simple question of whether deposits create loans or loans create deposits.
Bear in mind that, on this model, as banks create more and more loans unbacked by previous reserves, capital borrowing or deposits, they also create more and more future deposits. But just like the loans that created them, these deposits are created from ‘money’ that was originally unbacked. So their argument is not that banks don’t need deposits, but that, just like loans, they can create the deposits they need out of nothing. By creating deposits out of nothing in this way they create the means by which the whole banking system pulls itself up to capitalist heaven by its own bootstraps.
Sounds nonsense, of course. But where is the logical flaw in the argument? Or the empirical evidence that demonstrates it doesn’t happen. I’m beginning to suspect that though the material evidence is potentially there it is inaccessible, at least for someone like me, and that within its own terms the logic is unassailable. Fortunately, just because an argument is valid, it doesn’t mean that its conclusion is true.
ALB wrote:Hud955 wrote:Assume a single bank for now and assume a bank rate of 10%. If the bank receives a deposit of £100 and lends 900% of that or £900 as your green party guy claims, it will in due course receive a deposit of £900. Its books will then show £1000 in deposits (£100 and £900) and a £900 loan. There would be no obvious way of distinguishing between this situation and another where it recieved an initial deposit of £1000 and loaned 90% of that or £900. Again, its books would show deposits of £1000 and a loan of £900.But it would be what happens next that would be different. Assuming that the bank has chosen or is obliged by law to keep 10% of any deposit as cash, if on receiving a deposit of £100 it can lend then out £900 which then comes back to it, this means that it could then immediately lend out 9 times that, ie. £8,100. And when this comes back 9 times that, or £72,900. And when this comes back it could lend 9 times that, or £656,100. And then 9 times that, or £5,904,900. It doesn’t finish there. In fact in never finishes. I think the Ancient Romasn logicians used to call this refutation by means of reductio ad absurdum.
I agree, this theory is entirely rubbish, and based on a mistaken understanding of the bank reserve process as published. I don’t have a problem with that. (Though I’ve never heard a proponent of it making a defence. It would be interesting to see how they do it. This problem must have occurred to them.) In that respect, I think the Positive Money argument is stronger. That’s what’s giving me problems.
But just on Darren’s point, which, if valid, would have been a useful check on any theory that claimed that banks could issue more loans than they had deposits – checking to see if bank deposits were less than loans would not prove anything unless you could do some pretty sophisiticated statistical analysis. If banks were lending at 900% of deposits (presuming they were able, or at least lending in excess of deposits), all that would show up in the accounts is the short-term temporary difference between recent deposits and loans as a percentage of total deposits, which would be much smaller than 900%.DJP wrote:It would seem that the bank in your first example would go bankrupt the first time a single withdrawal of £100 or more was made, quite likely since the bank has to account for £1000. That’s why the situation doesn’t hold in real life.
I think this can be solved by getting balance sheets for all the major UK retail banks totalling them up and seeing if deposits increase in parallel with loans.LOL. I’m never going to get supper am I? (And by the way how is the assignment going?)
Actually, I don’t think the bank would necessarily go bankrupt at all. If you mean a withdrawal of £100 cash then all banks have cash reserves. Don’t forget also that cash is circulating through the system all the time. Any cash that it had to pay out would only be gone temporarily because, just like electronic payments, those grubby notes will come winging back rapidly in a new deposit (probably into the accounts of a retail business where it was spent). In any case banks can account for such withdrawals statistically when planning their lending policies. And in the last resort, if they did run out of cash temporarily, they could also borrow some briefly using their electronic reserves at the central bank.
As far as factoring payments into a bank’s lending policy is concerned it will know that statistically depositors do not withdraw money from their account all in one go but gradually – typically over the course of a month (in the case of a deposit account maintained by a salary cheque). But it will also know that by the time that first £100 withdrawal islikely to be made, the banks debtor – the owner of the loan account will have paid back the first installment of his loan. Banks do, as a matter of course calculate the rate of repayment carefully. And in this case loans made against salary accounts are usually very short term.
By the way, I’m not claiming that this is what does happen; I’m just suggesting that theoretical arguments like this areoften not as straightforward as they seem. But in any case I suspect banks can get away with lending above deposits for short periods, so long as they are not too out of step with what the rest of the system is doing. The important point is that this results in a creation of bank deposits, and in a ‘creation’ of credit but not a creation of money. I can’t see that happening in any of the scenarios I have looked at – positive money’s notional banking with its unfettered creation of accounts or the several varieties of reserve banking.
