User talk:WouNur

Fractional-reserve banking

If you don't like Werner's work, you may appreciate the Bank of England's, "Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money." http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf _____________________________________________________ Hello, and welcome to Wikipedia! Before making tendentious edits at the article on Fractional-reserve banking, please read your source material again. Also, read the Wikipedia article and the related talk page carefully. Famspear (talk) 21:17, 12 November 2015 (UTC)[reply]

The link you cited was not to an abstract of a paper, not to the language of the paper itself. The abstract states, in part:

In this paper it was found that banks combine what are effectively very different operations, namely deposit-taking and granting of loans under one roof, because in this way they can invent new money in the form of fictitious ‘customer deposits’ when purporting to engage in the act of ‘lending’.

Part of the problem is that this is the viewpoint of the person who wrote the abstract. It may or may not represent the view of the person who wrote the article itself.

Another part of the problem is that some people who are not trained in this subject do not understand that there is nothing "fictitious" about "inventing new money" in this way.

The abstract does seem to refer to the admittedly misleading standard terminology of banking, such as "making a deposit" and "making a withdrawal." However, bankers do not generally lie to a depositor about the nature of the transaction for making a deposit. And bankers do not generally lie to a borrower about the nature of the credit that the borrower is receiving.

Banks are not merely "purporting" to engage in "lending." Banks ARE lending when they debit the asset account on their books (e.g., loans receivable, etc.) and credit the liability account on their books (e.g., customer deposit liability, etc.).

The fact that the customer's deposit account does not consist of actual paper currency and coin is not a deep, dark secret that is being kept hidden. Famspear (talk) 21:30, 12 November 2015 (UTC)[reply]

Dear WouNur: I just checked a PDF copy of the original source material, and it appears that the quote was indeed from the original source, not from the abstract. I apologize for my mistake.

Nevertheless, the idea that the way banks invent new money is somehow "fictitious" is a view presented in the source material. In Wikipedia, we can't take sides. So, perhaps the material can be re-introduced further down in the body of the article, and re-worked to clearly state that it is the opinion of the author, Richard A. Werner. Famspear (talk) 21:40, 12 November 2015 (UTC)[reply]

For the record, the article is entitled "How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking," by Richard A. Werner, Centre for Banking, Finance and Sustainable Development, Southampton Business School, University of Southampton, United Kingdom, published at 36 International Review of Financial Analysis pp. 71-77 (2014).

In the article, Werner makes statements like these:

The ‘lending’ bank records a new ‘customer deposit’ and informs the ‘borrower’ that funds have been ‘deposited’ in the borrower's account. Since neither the borrower nor the bank actually made a deposit at the bank—nor, in connection with this transaction, anyone else for that matter, it remains necessary to analyse the legal aspects of bank operations. In particular, the legality of the act of reclassifying bank liabilities (accounts payable) as fictitious customer deposits requires further, separate analysis. This is all the more so, since no law, statute or bank regulation actually grants banks the right (usually considered a sovereign prerogative) to create and allocate the money supply....

I don't know what Werner's educational background is, but it almost appears as though he believes he has "discovered" something about banking that is not routinely taught in school. Maybe it's not taught in schools in Britain? The article is from the University of Southampton in the United Kingdom. Perhaps his claim (that there is no law, etc., actually granting banks this "right" to create money) is true for the United Kingdom. I live in the United States.

I need to read the entire article later, but Werner is explaining concepts that are considered pretty basic stuff in a college course on money and banking in the United States. Famspear (talk) 22:04, 12 November 2015 (UTC)[reply]

Also, if you are in any way connected to Richard A. Werner, you need to state so. It is Wikipedia policy that potential conflicts of interest need to be declared. Additionally, if you have edited Wikipedia before using another account, you need to clearly state so on your userpage. LK (talk) 06:12, 13 November 2015 (UTC)[reply]