[OPE-L:5692] Re: banking

Paul Cockshott (wpc@CS.STRATH.AC.UK)
Fri, 7 Nov 1997 21:38:25 GMT

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At 08:34 06/11/97 -0800, michael perelman wrote:
>Paul asked:
>> What is the origin of the profit under these circumstances.
>> >
>> > > Banks make their profits not from their trading activities
>> > > ( charging for clearing cheques and suchlike ) but from
>> > > lending out their depositors money. Hence they tend to show
>> > > a trading loss offset by profits on lending.
>> >
>> > Traditionally, this was true, but more and more banks make their
>> > from services that are off the books, such as guaranteeing lines of
>> credit,
>> > etc.
>I assume that you mean "the origin of profit" in a conventional sense.
>They are not lending out depositors money. Their guarantees far exceed
>that amount, at least in the U.S., since these transactions are "off the
>books", meaning that they require no reserves. They are gambling -- taking
>a risk -- hoping that the majority of their bets do not turn sour.

Yes but what is the mechanism which allows them to accrue a net revenue
from this. Gambling by itself is not an explanation for acruing surplus

Paul Cockshott (wpc@cs.strath.ac.uk)