My personal observation on this is that King's criticisms of ex nihilo "money from nothing" theories about banking is correct. There is a lot of misunderstanding generated by the saying "loans create deposits". Endogenous money destruction is hardly explored. Ironically, you hear people talking & others complaining about endogenous money creation - but they do that during the downturn, the part in the cycle in which endogenous money destruction occurs.
To sum it up, why banks giving out loans is not counterfeiting. A counterfeiter prints money & uses it to purchase goods & services (produced by others). The counterfeiter doesn't provide any work in exchange for the money he uses. To the people who claim that banks counterfeit the Government's money... If that were true, banks would have no reason to borrow reserves from the inter-bank market, or from the Central Bank, and they wouldn't have to sell new shares to secure funding. Bank loans are claims against debtors, which can only be satisfied if the debtors work to earn money & make debt payments.
Most people think about the system as one ponzi scheme, but the savings & loans system & the clearinghouse system are two different things. The latter is what ensures the ATM spits up your cash when you go to withdraw it, and since banks reserves are one form of Government debt, used for accounting & settlement purposes, a Government agency ensures the clearinghouse or payment system. From primitive times, people issued & call in private IOUs all the time; but the integrity of the system was ensured by a third party (be it the shaman, the council of elders, the magistrate etc).
Quote:
Whether using cash or the IOUs embodied in bank deposits and loans, what money does is to quantify our economic obligations to each other. Graeber (2011:33) as anthropologist has usefully shown us that barter came after money, not before, and for this simple reason: money puts numbers to things. Money effectively sets the exchange rate between economic items, whether between potatoes and telephones, or between haircuts and oil paintings, or between labour and legal representation.
Banking, unlike what it was in history & what it is today, should be boring. It should be used for public purpose, offering services at cost to consumers & firms. Bankers shouldn't be making more than what people working at customer support make. The Government can always provide free checking accounts at the Central Bank for its citizens, though.
