I think your arrow notation is inspired by my two favourite renegades, Prof. Richard Werner and Steve Keen, economists who use double-entry accounting rules to explain economic and banking realities. It not only exposes economic fallacies but should also help non-accountants master the confusing logic of double-entry accounting, the in-house language of banking.
But here, tacking “bank jargon” (which you said you “don’t much like” [“Money and Banking (2)”]) onto you arrows misrepresents what banks actually do and disguises the accounting fraud in their “credit-lending” scam. You’ve hidden the bank’s accounting under a layer of misleading “bank jargon” which contradicts what your arrows imply. As you’ve said elsewhere, the “reality” is NOT a “loan” from the bank to Alice but the swapping of equal promises-to-pay (or equal liabilities). Your arrows are correct but their bank-inspired labels are spurious and misleading.
The bank is deceiving Alice, who didn’t give a “loan” to the bank [as the label “£10,000 (loan)” implies] and it didn’t give Alice a “deposit” [as the label “£10,000 (deposit)” implies]. It was Alice who made a “deposit” into the bank; the “exchange value” of her deposit [£10,000.00] was recorded as a “£10,000.00 DR” in Alice’s “debit account” [as a bank asset], and accounting rules forced the bank to record a matching “£10,000.00 CR” in her “credit account” [as a matching bank liability].
Your articles and replies to comments convince me that you understand these facts, but the ambiguity of your “bank jargon” can only mislead readers who don’t. Even worse, such bank jargon sustains the fiasco which allows banks to create the appearance of “a loan” of something [a credit balance] which, according to the Bank of England, “can’t be lent” BECAUSE it’s a bank *liability*.
What Alice has created for herself is a £10,000 “credit facility”. It consists of a “£10,000 debit balance in one account” and a “£10,000 credit balance in another account”. Both balances arose simultaneously when Alice deposited her “promise-to-pay £10,000”. The bank created her two accounts and will do the bookkeeping when she operates the facility, but is otherwise merely a professional “service-provider”, as no “money” is involved, only recording “credits" and "debits”.
Provided Alice agrees it’s strictly a “credit” facility (meaning cash withdrawals are prohibited!), then no bank asset will be put at risk by accepting Alice’s promise-to-pay £10,000. Interest charges and mortgage/security are unjustified for such a “risk free” transaction, viz., swapping Alice’s £10,000 liability for an equal £10,000 bank liability. Her facility should attract legitimate fees for the bank’s “professional accounting services” only.
While any of Alice’s initial £10,000 credit balance remains in circulation, the bookkeeping bank retains a record of that outstanding amount as a “debit balance” in her liability account [i.e., the bank’s asset a/c], which means on-going “account-keeping fees”. Stopping those account-keeping fees is the financial incentive for Alice to pay that "£10,000.00 DR" balance down to £0.00 as quickly as she can, but keeping the facility open should be at her discretion.
I think your arrow notation is inspired by my two favourite renegades, Prof. Richard Werner and Steve Keen, economists who use double-entry accounting rules to explain economic and banking realities. It not only exposes economic fallacies but should also help non-accountants master the confusing logic of double-entry accounting, the in-house language of banking.
But here, tacking “bank jargon” (which you said you “don’t much like” [“Money and Banking (2)”]) onto you arrows misrepresents what banks actually do and disguises the accounting fraud in their “credit-lending” scam. You’ve hidden the bank’s accounting under a layer of misleading “bank jargon” which contradicts what your arrows imply. As you’ve said elsewhere, the “reality” is NOT a “loan” from the bank to Alice but the swapping of equal promises-to-pay (or equal liabilities). Your arrows are correct but their bank-inspired labels are spurious and misleading.
The bank is deceiving Alice, who didn’t give a “loan” to the bank [as the label “£10,000 (loan)” implies] and it didn’t give Alice a “deposit” [as the label “£10,000 (deposit)” implies]. It was Alice who made a “deposit” into the bank; the “exchange value” of her deposit [£10,000.00] was recorded as a “£10,000.00 DR” in Alice’s “debit account” [as a bank asset], and accounting rules forced the bank to record a matching “£10,000.00 CR” in her “credit account” [as a matching bank liability].
Your articles and replies to comments convince me that you understand these facts, but the ambiguity of your “bank jargon” can only mislead readers who don’t. Even worse, such bank jargon sustains the fiasco which allows banks to create the appearance of “a loan” of something [a credit balance] which, according to the Bank of England, “can’t be lent” BECAUSE it’s a bank *liability*.
What Alice has created for herself is a £10,000 “credit facility”. It consists of a “£10,000 debit balance in one account” and a “£10,000 credit balance in another account”. Both balances arose simultaneously when Alice deposited her “promise-to-pay £10,000”. The bank created her two accounts and will do the bookkeeping when she operates the facility, but is otherwise merely a professional “service-provider”, as no “money” is involved, only recording “credits" and "debits”.
Provided Alice agrees it’s strictly a “credit” facility (meaning cash withdrawals are prohibited!), then no bank asset will be put at risk by accepting Alice’s promise-to-pay £10,000. Interest charges and mortgage/security are unjustified for such a “risk free” transaction, viz., swapping Alice’s £10,000 liability for an equal £10,000 bank liability. Her facility should attract legitimate fees for the bank’s “professional accounting services” only.
While any of Alice’s initial £10,000 credit balance remains in circulation, the bookkeeping bank retains a record of that outstanding amount as a “debit balance” in her liability account [i.e., the bank’s asset a/c], which means on-going “account-keeping fees”. Stopping those account-keeping fees is the financial incentive for Alice to pay that "£10,000.00 DR" balance down to £0.00 as quickly as she can, but keeping the facility open should be at her discretion.