The document discusses several topics related to debt and the banking system: 1. It explains that banks create credit and issue money through lending, which is the defining feature of capitalism according to some economists. 2. It states that credit creation by banks has not just responded to production needs but also speculative demands, fueling inflation. 3. As governments received funds from uncontrolled credit creation, citizens will eventually have to pay for guaranteeing the monetary system.

1. Irish Political Economy for Trade
Unionists and Activists
4. Debt

6. Page.37
This creation of credit-money by
lending in the form of issued
notes and bills, which exist
independently of any particular
level of incoming deposits, is the
critical development that
Schumpeter and others identified
as the differentia specifica of
capitalism.
If banks could not issue money
they could not carry on their
business.
Credit creation is the actual
business of banking

7. Page.39
It is clear that in the late
twentieth and early twenty-first
centuries, the bank credit
creation system was not just
responding to the needs of
production but to the demands of
speculative inflation.
Page.40
As states were receiving the
product of uncontrolled credit
creation, the public would
eventually have to pay the price in
its role as guarantor of the money
system.

28. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
- Fischer Black, “Fundamentals of Liquidity” (1970)

29. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
But these functions are separable. There is no reason why the person who supplies the money
for a financial asset should take the risk associated with the asset. And the risk can be
transferred from one person to another independently of any transfer of the money
investment from one person to another.
- Fischer Black, “Fundamentals of Liquidity” (1970)

30. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
But these functions are separable. There is no reason why the person who supplies the money
for a financial asset should take the risk associated with the asset. And the risk can be
transferred from one person to another independently of any transfer of the money
investment from one person to another.
…a long term corporate bond could actually be sold to three separate persons. One would
supply the money for the bond; one would bear the interest rate risk; and one would bear the
risk of default. The last two would not have to put up any capital for the bonds, although they
might have to post some sort of collateral.
- Fischer Black, “Fundamentals of Liquidity” (1970)

31. Residental / Commercial Mortgage Backed Securities

34. Failing to see that commercial money
creation was behind the flood of money in
the new financial world, bankers and
financiers congratulated themselves on the
amount of money they were making.
As money markets have grown, bringing
together a wide range of financial
organisations including the banks, the
privatised financial system is effectively
creating money for itself.
Mary Melor, The Future of Money (Pluto Press, 2010), p.53

37. Irish Executives in the six
lenders must have been
rubbing their hands with
glee as the State-sponsored
€400 billion insurance
policy covers commercial,
institutional and interbank
deposits, and investors who
have bought some of their
debt.
The State guarantee allows
the six lenders to borrow
more freely and more
cheaply for short-term
funding that had become
scarce due to the global
credit crunch.

38. Mr. Lenihan said on
Tuesday that the
increase on the cap on
deposit guarantees up
to €100,000 from
€20,000 last month
covered 97 per cent of
customer deposits so
the guarantee has
clearly been included
for the benefit of the
banks rather than the
savers…

39. “Denis Casey, chief
executive of Irish Life
and Permanent, said
the guarantee would
allow Permanent TSB
and the other Irish
banks covered to
borrow more cheaply.
“The oxygen supply for
Irish banks was being
cut off and healthy
banks were starting to
gasp for breath. This
guarantee turns on
the oxygen supply.”

48. Work as a realm of
class conflict
Inflation as a realm of
class conflict