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overtheedge
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Money and Credit 2: Credit - Nathan Lewis - New World Economics

I think it was Vladimir Lenin who stated something to the effect of, "The first thing we do is corrupt the language."

""Credit" is just borrowing and lending"

No it is not.
Credit is the offer to lend from those who have to those who have not.
Should the prospective borrower avail themselves of the loan, they convert the offer of credit to that of debt.

"Thus, banks, acting with nefarious collective intent, could conceivably cause financial chaos by letting existing loans mature and be repaid, and not making any new loans to allow refinancing of the short-term debt (and also long-term debt coming due). Borrowers would face bankruptcy, even if they were fundamentally sound. "

Nefarious intent?
Gimme a break.
1. No entity is required to continue to offer credit to any and all entities regardless of their supposed ability to repay the loan.
2. Any unwillingness by a lender to offer credit for whatever reason is NOT necessarily nefarious.
3. The primary question then becomes one of, "Why does the entity need a loan?"
4. The follow-up question is then, "Is this loan desired for a productive enterprise?"
5. A productive enterprise borrowing must translate to a reliable income stream. Said reliability MUST be for the life of the loan.
6. At the very heart of the matter is the question of why does the prospective borrower lack liquidity and/or solvency.
7. That directly translates to a failure of fiscal management. What did the prospective borrower do with the profits from their income stream?
8. The premise that the lender is acting in a nefarious manner because the refusal to loan monies to an entity that fails to maintain sufficient capital assets to cover operating costs and modest expansion is ridiculous. A lender shouldn't be throwing good money after bad.

Of course all of this directly applies to the lending entity as well.
1. In the vast majority of cases, the prospective lender is operating with borrowed monies as well.
2. Said lender has a fiduciary responsibility to maximize shareholder value and repay the bonds.
3. The share/bond holders will establish the operating parameters of the business.
4. First, last and always, he who holds the gold makes the rules.

It would appear that all entities other than those who have maintained minimal to no debt load have forgot these maxims:
Everything is connected to everything.
Everything has to go somewhere.
There ain't no such thing as a free lunch.

If you can't pay off the bills with your current income stream, you have failed. Be you an individual, corporation or a nation.
There is nothing nefarious about cutting off a deadbeat from credit and exercising the "payable on demand" clause on the outstanding loans.
Count me among those sick and tired of the endless ragging on bankers for being bankers.
They were your friend when they loaned you the money and now they are nefarious for demanding repayment.

Feudalism never ended; it just got a new paint job.
Now as then, there are/were some who used wise money management to rise from serfdom to what was and will once again be a small middle class.
Service industries are completely dependent upon the serf's discretionary monies. All too soon, none will be forthcoming.
Why do you think governments have been war-gaming widespread civil disturbances?

Might I suggest that the readership avails itself of a free download, "The Richest Man in Babylon" by George S Clauson.
And for those who suggest that it might have been true when gold was the operative currency, gold is still top drawer collateral.

Commented 3055 days ago

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Beginning of the headline :"Money and credit" have tended to be mishmashed together, but they are very distinct. This confusion stems from the common practice of banks in the past (mostly before 1914) to both issue currency and also make regular commercial loans, like banks today. However, it is best to think of them separately. They are separate today, as the currency issuer (central bank) is distinct from commercial banks. They were also separate in the past, when only bullion coinage was used as money. In practice, thi... Read More

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