[Cromwell]

I have been drifting leftward in my thinking for quite some time now and, though I hold onto my resentment of the New Left (with its rejection of nationalism, authoritarianism and such), I could comfrotably call myself a Communist or Marxist-Leninist.

However, I still retain an interest in, and sympathy for, the Social Credit monetary theory.

Whilst I, ultimately, reject its defence of the class system and private property, I am fully convinced of its economic merit (especially as it pertains to the banking system). But, when setting out to see if there were any Marxist works which specifically mentioned it, I became, honestly, appalled by what appears to be an aggressive defence of, and apology for, the horrendously exploitative banking system.

For the record these are the articles I read:
http://amadlandawonye.wikispaces.com/Social+Credit,+Ecosocialism+of+Fools,+Derek+Wall,+Capitalism+Nature+Socialism
http://www.marxists.org/archive/novack/1934/11/utopia1.htm
http://www.marxists.org/archive/hardcastle/creatingcredit.htm

Far from criticizing Douglas simply for his defence of the class system, they attack his economics and defend the money-lenders against his rightful attacks.

They begin by attack his foundational equation, the A+B theorem (which states that there is never enough money available to purchased all goods produced), by stating that the two values are the same. They are not: banks always demand more money back (principal plus interest) than they lend out (principal alone).

They, also, completely ignore fractional-reserve banking and deny that the power to create credit rests in private hands; I cannot, at all, fathom how any Marxist (who should pride himself on an advocacy of social justice) can jump through so many intellectual hoops solely to protect bankers from criticism.

The fact is this: Banks lend out more money (as bank credit) than they receive (as deposits) and charge interest on them. 97% of all money in the economy is bank credit and, therefore, bears interest. Artificial scarcity is, thereby, created as people are forced into competition in order to repay their debts. Foreclosure and bankruptcy are inevitable as there is never enough money for all loans to be repaid.

I'm wondering if anyone here can give me a better insight into the Marxist view of finance.

[lucky]

They begin by attack his foundational equation, the A+B theorem (which states that there is never enough money available to purchased all goods produced), by stating that the two values are the same. They are not: banks always demand more money back (principal plus interest) than they lend out (principal alone).

This does not make sense. There is no contradiction between the two statements. I can lend you $100 at interest for an apple business, you can sell $200 worth of apples back to me, pay me back the principal and interest and keep a profit.

Besides, money supply does not determine how many things can be purchased. A single $5 bill can be used to facilitate $500 worth of transactions. Money supply and production (say, GDP) are not even in the same units: one is in USD, the other in USD/year.

The fact is this: Banks lend out more money (as bank credit) than they receive (as deposits) and charge interest on them.

That would be "negative reserve banking" rather than fractional reserve banking. The whole point of fractional reserves is that you actually keep a fraction of your deposits in cash and invest the remainder.

[Cromwell]

This does not make sense. There is no contradiction between the two statements. I can lend you $100 at interest for an apple business, you can sell $200 worth of apples back to me, pay me back the principal and interest and keep a profit.

But not everyone can afford to pay the interest because more is demanded (principal plus interest) than has been lent out (principal alone).

Besides, money supply does not determine how many things can be purchased. A single $5 bill can be used to facilitate $500 worth of transactions. Money supply and production (say, GDP) are not even in the same units: one is in USD, the other in USD/year.

The theorem is concerned, only with purchasing power. There is less available than is necessary to purchase all goods produced.

That would be "negative reserve banking" rather than fractional reserve banking. The whole point of fractional reserves is that you actually keep a fraction of your deposits in cash and invest the remainder.

I don't know what you're talking about. Banks lend out more money than they hold in deposits, that's the fact of matter; they're confidence game is that not all loans will be redeemed in paper money and expose the fraudulent practice by which the bank gets something for nothing.

"Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account." -Adair Turner

[Leninist]

I do not see why you are particularly attracted to this idea if you are a Marxist. It seeks to create an "aristocracy" of producers, who are technically subservient to the consumers, but the problem with this as I see it is that the producers, having control of the mapeans of production, and therefore the potential for wealth of the economy, would enevitably break through the chains which the consumers place on them. I would use as justification for this statement the fact that in every existing capitalist system the corporation inevitably brakes down the regulations placed upon it.

In Marxism though, there is democratic control of credit, as it would be controlled by the people through their elected representative councils and a state bank.

[Cromwell]

I do not see why you are particularly attracted to this idea if you are a Marxist. It seeks to create an "aristocracy" of producers, who are technically subservient to the consumers, but the problem with this as I see it is that the producers, having control of the mapeans of production, and therefore the potential for wealth of the economy, would enevitably break through the chains which the consumers place on them. I would use as justification for this statement the fact that in every existing capitalist system the corporation inevitably brakes down the regulations placed upon it.

In Marxism though, there is democratic control of credit, as it would be controlled by the people through their elected representative councils and a state bank.

It's the actual economics that I'm interested in (such as the critique of banking and debt slavery) more than the philosophy.

Thanks, however, as you're last statement clarifies a lot. It's hard not to wonder why these Marxist (those whose articles I've linked) spend a lot of their time defending the private banking system; it seems counter-intuitive.

[Paradigm]

The thing about credit is that it involves double-entry bookkeeping. For every in the credit column, there is a corresponding debit column that cancels it out. This means that all accounting entries add up to zero. The bank is on the hook for every loan they make, and if it doesn't get paid back, it's a real loss for them. Credit is just a matter of shifting around obligations. If you've ever bought something on layaway, that's credit. They give you the merchandise on the belief ("credo" means "I believe") that you will pay it over time. Banks make no money on the principal of a loan. It's all about the interest (plus collateral they can repossess).

It's not that socialists like the banks. It's just that they recognize monetary reform movements as a distraction. The bankers need to be overthrown because they're part of the capitalist class, not because of some misguided notion about them "creating money from nothing," which confuses the difference between money and credit. State socialists tend to favor nationalizing the banks (or at least that's what a group of Trotskyists told me as they tried to sell me their newspaper), and libertarian socialists (anarchists) tend to favor either mutual credit (which puts credit right in the hands of the people themselves), labor notes issued by a commune, or a money-free society based on mutual aid.