tag:blogger.com,1999:blog-2481137628297928213.post3387346466027059552..comments2024-02-09T11:22:53.940-08:00Comments on tc allen: Analysis of Richard Cook’s Monetary Reforms Part IVtc allenhttp://www.blogger.com/profile/02206551463797442456noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2481137628297928213.post-70760890742175836492010-08-16T11:49:21.883-07:002010-08-16T11:49:21.883-07:00I may have misunderstood Mr. Cook’s comments on th...I may have misunderstood Mr. Cook’s comments on the real bills doctrine and the stocking of inventory. So, I have revised two paragraphs and add a new paragraphs about his comments on the real bills doctrine and the stocking of inventory. These paragraphs follow.<br /><br /> Unlike the one of the examples that Mr. Cook gives, a real bill of exchange is not a loan. No lending or borrowing is involved. Also, unlike Mr. Cook’s example, a real bill is a self-liquidating credit instrument.<br /><br /> If a bank treats loans for business expansion like real bills, it is operating unsoundly and risks bankruptcy. Bank lending for expansion should come from savings. Furthermore, the loans should be for a duration of no greater than the time that the savings is required to be deposited at the bank. Such are sound banking practices.<br /><br /> If by “stocking of inventory,” Mr. Cook means a retailer stocking his shelves for immediate sell, a real bill covers such stocking. If he means a retailer acquiring excessive inventory in anticipation of a rise in wholesale or retail price, a real bill would not cover such stocking. (Many loans for stocking inventory are for purposes of speculating on future demand or price changes. Mr. Cook wants to outlaw loans for speculation. How is he going to distinguish between lending for speculative stocking and lending for nonspeculative stocking?)Anonymousnoreply@blogger.com