A comment on the first letter in that article: Many people seem to think that we could create a better currency by banning banks from 'creating money'. They do

A comment on the first letter in that article: Many people seem to think that we could create a better currency by banning banks from 'creating money'. They don't want to ban banks, they just want to ban the idea of money 'based on debt'. Instead they propose that the government create all the money. What they don't understand is that you can't ban 'debt money' without banning banks, and you can't ban banks without banning short-term lending altogether. Money is usually defined as that which a community uses as a means of payment. It could equally be defined as any asset that is extremely liquid. If something can be converted into money extremely quickly at little cost then it can be used in place of money. If it is used in place of money, then it is money, as it is being used as a means of payment. Bank accounts are by their nature extremely liquid. The purpose of a bank is to take on liquidity risk. That's to say, its job is to invest people's money in long-term (and hence high interest) investments, while at the same time allowing them access to it, should they need it. To put it another way: a bank insures investors against a sudden need for liquidity. Therefore, any institution that offers either demand deposits or extremely short-term loans, and pays interest on them (which implies that they must be investing the money in less liquid assets) is performing the same function as a bank. Because a bank deposit, like any very short term loan, can be quickly converted into cash, it is a highly liquid asset. It therefore is money. The banks aren't performing any kind of sinister trick. By providing liquidity insurance, they are by definition supplying the markets with highly liquid assets, and the market will always choose to use such assets as currency. So you can't ban banks without banning short term loans, because short term borrowing with interest is banking. And you can't ban debt-based money without banning the creation of highly liquid assets, which is exactly what short term loans are. Oh, and I suspect the writer of the letter doesn't know what "capital reserves" are either. He's probably just confusing capital with reserves.