Reforms in China’s Monetary Policy Reforms in China’s Monetary
II. The Money Creation and Banking Operation Theory under
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| II. The Money Creation and Banking Operation Theory under
the Credit Monetary System (a) The Bank’s Basic Business—Deposits and Loans The credit monetary system is different from the commodity monetary sys- tem. Under the commodity monetary system the credit and the money are separated from each other. Money is only a vehicle of the credit; the credit itself cannot create money and cannot change the amount of money. Under the credit monetary system, the credit money is the only money circulating in the society. Banks create credit money, in which credit inte- grate with money. Entities other than banks cannot create money. Banks create money by two credit behaviors—loans and assets trading, which will increase banks’ assets to their clients and create liabilities to their clients. Through exchanges of goods and financial assets, the money created by banks 28 ● Reforms in China’s Monetary Policy flows from clients who have money to the public and then is redistributed among the public. Thus the money is circulating in the entire society. The difference between the operation of modern banks and Qianzhuang is as follows: 1. Money (gold) is an asset to Qianzhuang , whereas money (deposit) is a liability to banks, which results in a significant difference: when Qianzhuang makes loans, its loan assets increase and money assets decrease; while when modern banks underwrite loans, their loan assets increase, and money lia- bilities increase. During this process, the total assets of Qianzhuang remain unchanged, while banks total assets increase. This means that banks can cre- ate assets whereas Qianzhuang cannot. 2. Under the commodity monetary system, after the public borrows gold from Qianzhuang , the use of gold will have nothing to do with the balance sheet of Qianzhuang . But under the credit monetary system, after the pub- lic obtains deposits through loans, the use of the deposits will have a direct impact on banks’ balance sheets. If a bank’s clients withdraw cash or trans- fer their deposits to other banks, the bank’s monetary base will be reduced accordingly. The reverse operation will definitely increase the bank’s monetary base. As far as individual banks are concerned, the transfer of deposits among banks and the conversion between cash and deposits (for banks as a whole, only the conversion between deposits and cash exists) have a direct impact on the basis of banking operation—the monetary base. To create more deposits, the monetary base needs to be increased, and to increase the monetary base, a bank needs to compete with the other banks for deposits or reabsorb the cash withdrawn by clients. Bank loans are exchanges of credit claims between banks and their cli- ents, in which banks provide their clients with credit claims with liquidity— deposits, and clients give banks credit claims with a high yield—loans. This is banks’ basic business as credit institutions. If there is no external constraints, banks can engage in such business to an infinite extent. This raises two issues: the first is the public confidence in bank’s liabilities, and the second is con- straints on the aggregate amount of banks’ liabilities. tải về 1.53 Mb. Chia sẻ với bạn bè của bạn:
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