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You're confusing credit and investment again: because your thinking is based upon money as debt.

Money need not be debt.

Secured credit is one thing: bilateral "trade" credit between suppliers and customers eg a supplier and a buyer of LNG is quite another. This does not involve "investment" (of existing "wealth") at all, but rather value circulation and the bilateral creation of "wealth" through transactions on guaranteed credit terms between "productive" counterparties.

Banks will be service providers in two ways:

(a) managing bilateral and mutually guaranteed "trade" credit within a Clearing Union framework - ie quasi merchant banking;

(b) bringing investors together with investments, and possibly providing liquidity - investment banking.

In the former case the bank - as system manager,and appraiser of "guarantee limits" (formerly known as credit limits) - would have an interest in minimising defaults, since it would receive its remuneration via a subscription from system members and participation in the default pool.

I think we are condemned to jousting past one another on this.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Nov 28th, 2007 at 09:06:41 AM EST
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