PhD thesis Chapter Ⅻ: Conclusion

摘要

In the preceding pages the theory that the primary function of the banking system is the provision of the circulating capital of the community, here referred to as the commercial loan theory of banking, was critically examined. It was found to be based on three main grounds: the Banking Principle of credit issue, and the supposedly greater liquidity and productivity of commercial loans. It was held that the Banking Principle of credit issue by central bank is untenable both because a loan from a central bank may result in a manifold expansion of credit, and because the assumption that the circuit velocity of deposits in unity is unwarranted. In the discussion of the liquidity of bank assets it was suggested that marketability is of paramount importance. From this point of view security loans and most investments were shown to be more liquid than most commercial loans (excepting commercial paper and acceptances for which an active market exists). In regard to the productivity argument advanced by supporters of the commercial loan theory of banking, attention was directed mainly to security loans which, in this view, represent the most unproductive type of bank asset.