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Banking today

by
13 September 2013

iStock

From Mr Andrew Ellis
Sir, - Derek Bevan ( Letters, 6 September) is quite correct, in that in ordinary businesses all transactions have a matching credit and debit entry; but banks are not ordinary businesses.

They have the ability to create "money out of nothing", as was pointed out by Andrew Dickie (Letters, 30 August), where every deposit can be used as a basis for lending up to the bank's liquidity ratio. This dictum dates from the early 19th century, when banking activities were relatively simple. There has been no real attempt to curtail the banking system, whether by the Bank of England or successive governments.

Indeed, given the complexities of modern banking, it is now impossible, and "light-touch" regulations of fringe financial activities have not helped. Far from improving the situation, quantitive easing will, in the long term, only aggravate the position when these vast sums of money ultimately find their way into circulation.

In my view, the sacrifices made by most of us since 2008 are merely papering over the cracks - and there is much worse to come.

ANDREW ELLIS
60 London Road
Cheltenham GL52 6EQ

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