|Apr 28, 2009 8:19 am
||re: re: re: Time to laugh
|| This was written 52 years ago in the British magazine Punch!!! Still holds true!
Punch Magazine - 3rd April 1957
Q: What are banks for?
A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesnít bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in
references to reserves of £249,000,000, 000 or thereabouts. That is
the money they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of £500,000,000, 000 or thereabouts.
Have they made that too?
A: Not exactly. That is the money they use to make money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they havenít got it?
Q: Then how is it Assets?
A: They maintain that it would be if they got it back.
Q: But they must have some money in a safe somewhere?
A: Yes, usually £500,000,000, 000 or thereabouts. This is called Liabilities.
Q: But if theyíve got it, how can they be liable for it?
A: Because it isnít theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts so it is really lent to
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people was Assets?
Q: Then Assets and Liabilities must be the same thing?
A: You canít really say that.
Q: But youíve just said it! If I put £100 into my account the bank is
liable to pay it back, so itís Liabilities. But they go and
lend it to someone else and he is liable to pay it back, so
itís Assets. Itís the same £100 isnít it?
A: Yes, but,.
Q: Then it cancels out. It means, doesnít it, that banks havenít
really any money at all?
Q: Never mind theoretically! And if they havenít any money, where do they get
their Reserves of £249,000,000, 000 or thereabouts? ?
A: I told you. That is the money they have made.
A: Well, when they lend your £100 to someone they charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a-half perce nt. Thatís
Q: Why isnít it my profit? Isnít it my money?
A: Itís the theory of banking practice that all.
Q: When I lend them my £100 why donít I charge them interest?
A: You do.
Q: You donít say. How much?
A: It depends on the Bank Rate. Say a half percent.
Q: Grasping of me, rather?
A: But thatís only if youíre not going to draw the money out again.
Q: But of course Iím going to draw the money out again! If I hadnít
wanted to draw it out again I could have buried it in the garden!
A: They wouldnít like you to draw it out again.
Q: Why not? If I keep it there you say itís a Liability. Wouldnít they be
glad if I reduced their Liabilities by removing it?
A: No. Because if you remove it they canít lend it to anyone else.
Q: But if I wanted to remove it theyíd have to let me?
Q: But suppose theyíve already lent it to another customer?
A: Then theyíll let you have some other customers money.
Q: But suppose he wants his too and theyíve already let me have it?
A: Youíre being purposely obtuse.
Q: I think Iím being acute. What if everyone wanted their money all at once?
A: Itís the theory of banking practice that they never would.
Q: So what banks bank on, is not having to meet their commitments?
A. YOU GOT IT!!
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