37 -- Fr. Charles Gibbons CC DD
(CC Skehana 1962 - 1964)
Fr. Charles Gibbons CC DD 1962 – 1964
Fr Gibbons came from Quay Street, Westport. His father was Richard Gibbons who was a licensed trader. His brother, also named Richard was a County Surveyor. He had a brother Thomas J who lived in Coventry. Patrick J Gibbons, another brother, lived in Liverpool and was a doctor. He had a brother, Sean Gibbons who was a solicitor in Dublin. He also had a brother, James, who lived in Quay Street, Westport. He had four sisters – Mrs C. J. Doherty, Mrs Christina Flatley, Mrs T Healy all who were teachers and a Mrs. Mary Warde who lived in Dublin. Thomas J was a fearless fighter in the struggle for freedom, and was one of the men who manned the home-made armoured car, “Queen of the West.” when Republican forces took Clifden from Free State forces in 1922. Thomas J died in Coventry in January 1953. Patrick J died in Liverpool in December 1957. Sean Gibbons died in Dublin in January 1964 and Sean’s son died the week before Fr Charles Gibbons passed away the following March.
He was ordained in Maynooth in 1929, was Professor at St. Jarlath’s College, Tuam from 1931 to 1943. He gained a Doctorate of Divinity in June 1931 – something which annoyed a later Arch Bishop of Tuam and caused life between them to be controversial. He ministered in Ballinrobe as C.C. from 1943 until 1951. He was then made C.C. of Irishtown from 1951 until 1954 when he was transferred again as C.C. to Mayo-Abbey in 1954 until 1962. During his life he also wrote some plays. One called “The Sign Of The Cross” was staged and produced by the Tuam Girl Guides in June 1939. He was a lover of Opera and an avid reader of all kinds of books. He had a special devotion to St. Thomas Aquinas and again gave several lectures on the saint during his time in Tuam
In 1962 he came to Skehana for two short years where he passed away in March 1964 in a car on his way to the doctor in Athenry. His health had been deteriorating for a number of years and he died from the effects of acute asthma. He is laid to to rest in the grounds of Skehana Church. In his will he left his car, a Morris Minor, reg. no. CIZ 613 to his housekeeper at the time, Bina Walsh.
It was very unusual for a priest who was a Doctor of Divinity D.D. to be ministering as a C.C. as it was usual for such a qualified priest to be involved in education at that time, but then I have been told from several sources that Arch Bishop Joseph Walsh could be difficult. Fr Charlie was also a first cousin of Fr Jimmy Gibbons who was PP in Menlough and in Athenry afterwards. FR Jimmy is laid to rest in the grounds of Athenry Church.
Fr Gibbons was an extremely educated man who, in May 1939, gave a Lecture in Tuam to the St. Vincent de Paul Society on the Banking Commission Reports. The following is an extract from the Tuam Herald of Saturday May 13th. 1939.
At the quarterly meeting of the Tuam Conference, Vincent de Paul Society, a very interesting paper on the ” Banking Commission Reports” was read by Rev. Charles Gibbons, D.D. There was a very large attendance, and all present listened with the greatest attention to the very lucid exposition of a very difficult subject. Rev. F T. Killeen, who was in the chair, introduced Dr. Gibbons to the meeting, and said that he, in common with all those present, was looking forward to the paper to be read that evening. The Reports of the Banking Commission would affect the daily lives of everybody, and all were anxious to get an intelligent grasp of the matter with which they dealt. Unfortunately the Reports constituted such a huge volume that the average man was apt to be deterred from reading them. Hence they should be very grateful to Dr. Gibbons for going to such trouble for their benefit. Proposing the vote of thanks, after the lecture, Mr. John Quinn, solicitor, said that he was very glad he came that evening. He had come’ hoping for enlightenment, and he was going away with his hopes fulfilled. He himself had read in a casual way through the Reports, and realised what difficulty there must have been in separating the major points from the minor. He was grateful particularly to Dr. Gibbons for refraining from criticism, and giving what he might call an objective account of the various reports. He had thoroughly enjoyed listening to the paper, and had great pleasure in proposing a vote of thanks to the Rev. lecturer. Mr. James Glynn, solicitor, seconded the vote of thanks, and said that he too had thoroughly enjoyed the lecture. A lively discussion of various points which arose in the course of the lecture followed, in which Mr. Patrick Purcell, N.T, Chairman Town Commissioners, Mr. John Burke, T.C., and Mr. John Joe Egan, T.C., took part. We print this week the first part of the lecture, that dealing with the Majority Report.
PAPER READ TO THE TUAM CONFERENCE OF THE VINCENT DE PAUL SOCIETY.
The Banking Commission was established in November, 1934, the terms of reference being as follows:— “To examine and report on the system in Saorstat Eireann of currency, banking, credit, public borrowing and lending and the pledging of State credit on behalf of agriculture, industry, and the social services, and to consider and report what changes, if any, are necessary or desirable to promote the social and economic welfare of the community and the interests of agriculture and industry.”
The function then of the Commission was two-fold: (a) to examine the present system, (b) to suggest any changes that might be necessary to promote social iwelfare. Under (a) in view of an official communique issued to the Press at the time of its appointment, the Commission decided that the terms of reference contemplated examination of ” the currency and exchange problems arising from altered conditions in regard to the gold standard, the question of a Central Bank and the loan positjon of local authorities.” Under (b) the Commission (or at least the signatories of the Majority Report) interpreted the allusion to changes as embracing primarilyjnatters within the sphere of currency, banking and loan policy.
The reports of the Commission were published in August, 1938. Of the twenty-one members of the Commission, sixteen signed a long report of some 370 pages, signifying thereby that they agreed in the main with its findings. This report is known as the Majority Report. It should be noted, however, that two of these sixteen signed the report with certain reservations, and five others with notes which are equivalent to reservations. Besides the majority report there are three minority reports (1) signed by Mr. O’Brien, Mr. Campbell and Professor _O’Rahilly, (2) by Professor Busteed, and (3) by Mr. O’Loghlen. It should be noted however, that it has been publicly stated by one of the signatories that the Minority Reports should not be taken as contradictory of, but rather supplementary to one another. At any rate they are at one in being opposed in fundamentals to the Majority Report. If we were asked to distinguish, in a general way, between the Majority and Minority Reports, we might reply in several different ways, each based on our own individual prepossessions in matters social and economic, and each more or less inaccurate. We might for instance try to distinguish them by saying that the signatories of the Minority Reports agree with the poet when he says: ” 111 fares the land, to hastening ills a prey, Where wealth accumulates, and men decay.” Whereas the signatories of the Majority Report do not agree. But that would be unfair, and would be always open to the reply that neglect of a, sound financial system may lead to a decay both of wealth and men. Again, we might say that the Majority Report is concerned primarily with the technical details of the manipulation of currency and finance, and that the Minority Reports are concerned primarily with broad human values. This, while containing more of the truth than the other method of distinction would be open to the reply that wrongful handling of technical details of finance would have serious effects on human life, and besides, is apt to obscure the fact that such careful handling of details by experts will be necessary no matter what system we adopt, whether it be that advocated by the Minority Reports or another. Perhaps the fairest way to draw a general distinction between the two is to say that the Majority Report expresses the’ belief that our present credit, banking, and financial system is not the cause, or the chief cause, of our many social and economic problems, while the minority reports maintain that they are the cause. !
My purpose, however, in this paper, is not to criticise, and I mention these points simply because they represent points of view that I have heard expressed. I have set before me the more humble task of, not exactly giving a synopsis of the reports, as that would be too difficult a task to perform with complete fairness, but rather to give a general idea of what the Banking Reports “are all about.” I shall avoid criticism, first, because, apart from the question of my ability to criticise, this paper will be quite long enough without any critical judgments thrown in. Secondly, such criticism as is useful or necessary is supplied by the Reports themselves. At any rate, I feel that the number of critics of the Banking Reports is already out of all proportion to the number of those who have actually read them, either in whole or in part. Accordingly I will simply try to indicate what is contained in the various reports.
THE MAJORITY REPORT. 1. History of Irish Banking.
As an introduction to its main report, the Commission reviews in brief the history of Irish Banking. The only part of it which concerns our present purpose is the fact that from 1826 to the Treaty of 1921 Irish currency and Irish banking were part of the mechanism of the United Kingdom. The Irish bank note was interchangeable with the Bank of England note because the Irish bank note was identical with sterling. The Treaty did not. alter the currency or credit position in the slightest degree. The Currency Act of .1927 created a new. legal tender for the (then) Irish Free State, but this change made no difference in the fundamental position, as the new legal tender was to be maintained on a rigid identity with the English pound. At the time England was on the Gold Standard, and the Free State, being linked to sterling was also on the Gold Standard. This situation prevailed till 1931, when the Gold Standard was suspended in the United Kingdom. From that time the Irish pound ceased to have any fixed gold value for its currency, and Eire is now one of the group of countries maintaining fixed exchange with sterling, and so is of the group of countries forming the so-called ” sterling area.”
2. Economic Background.
Since financial questions cannot be divorced from the underlying economic realities, the Commission, in order to carry out its function of suggesting improvements, found it necessary to examine the social and economic features of the country. The result is a very useful and enlightening summary of the country’s economic position, grouped under the headings of population, agriculture, industry, and finance with all its sub-divisions. From this section of the Report I have selected only those points which seemed to me to have most bearing on the subsequent findings of the Commission. These points are three in number, one dealing with population, one with agriculture, and one with finance. With regard to population, the Commission, after examining the downward trend of our population over a long number of years ” accepts it as a working hypothesis that no notable increase in the Irish population will occur during the next quarter of a century, and the possibility of a decline cannot be excludo.d from consideration.” This hypothesis has necessarily influenced the Commission’s view as to the possibility of carrying the burden of increasing liabilities, and the requirements of future investments in ‘ different directions, and the demand for the products of agriculture and industry.
With regard to agriculture ” As an exporter of agricultural goods Eire will necessarily feel the effects of changes in production and prices, not only of European, but of many overseas countries. It is indeed impossible for Eire to dissociate itself from economic movements in the external world and especially those in the United Kingdom.” Since the technical equipment of the world is constantly improving, with corresponding reduction in costs of production ” it remains the problem for each individual country to exercise constant vigilance in order to ensure that the execution of its policy does not directly or indirectly obstruct the advance of technical efficiency.”
The third point, that concerned with the financial condition of the country, vyill detain us a little longer. While noting that Ireland’ possesses great reserves of assets, the Commission finds itself disquieted by certain tendencies apparent in recent years. New capital development, by which is meant the production of capital goods such as premises, plant, machinery and raw materials, must, the Report says, normally be financed out of savings. While it is sometimes useful and necessary to utilise past savings (i.e., funds already invested in external securities) for this purpose, still if the country is to progress, new capital requirements should be met by new savings, and the older investments should be left untouched. In view of this the Commission is perturbed to find ” that the savings of the people as a whole, over the period reviewed (1931-1935), after all consumption needs have been covered have been insufficient to meet the public demand for capital and that the shortage has been made good by utilisation of past savings in the form of external investments.” What makes the matter more disquieting from the point of view of the Commission is the fact that the capital thus raised has* not all been productively invested. ” In the case of the borrowing of the Government and of the local authorities it is clear that a substantial part of the money raised has been applicable to purposes contributing to an increase of _dead-weight debt, especially in connection with housing.” Deadweight debt, we may mention, is a debt incurred for a purpose which does not directly, by its own profitable running, provide funds to repay the debt.
The Commission is led to the same disturbing conclusion by its examination of the ” Balance of Payments,” i.e., the difference between the amount of money received by the country as a whole (from exports, external investments, etc.,) and the amount paid out (for imports, etc. ) ” In each year there has been an adverse balance on the current account which has had to be covered either by encroachment on external capital assets or by increase of external liabilities.” As a result the Commission reaches the general conclusion that ” the figures indicate a marked deterioration in recent years in the state of the public finances.” The inference would seem to be that we are tending, to live on our capital. It should be noted however, that in the opinion of the Commission it is the ” trend rather than actual impairment that calls for criticism.”
I emphasise these three points, partly because, as I have said already, they exercise considerable influence on the findings of the Majority Report, and partly because they come in for a considerable share of discussion in the Minority Reports.
The standard of living of any community depends on (a) its own ability to produce, (b) trade, or the ability to exchange its goods with those of other communities.
First Minority Report:
You will have noticed that the Majority Report assumed all through that our present financial system is in the main satisfactory, and that only minor adjustments are necessary in order to’ make the system more efficient. This assumption the first “Minority Report denies, and maintains that on the contrary ” the disease of our industrial system is so deep-seated that a drastic remedy is required.” To put the matter in another way, the Majority Report assumes that failure to implement social ideals in such matters as employment, housing, etc., It does not concern a monetary enquiry as such, as the failure is not due to any defect in the. monetary system. The first Minority Report maintains that the failure is due to defects in our monetary system. The first Minority Report is a short one, as it’s purpose is ” to ask our fellow citizens to grasp certain fundamentals and not to allow themselves to he deterred by a terrifying display of ???gon.” We may summarise it very briefly thus : our present system is obviously diseased; the remedy is equally obvious; when disease and remedy are obvious, it is the function of financial experts to tell us how the remedy is to be applied, not to tell us of the damage done to the medicine.
As proof of the existence of the disease the Report points to conditions in Ireland: ” About 100,000 people are deprived of the right to live by labour; thousands of others live on intermittent jobs. Others, of whom we are reminded only when there is a shipwreck or a fire, have to migrate to Great Britain as harvest workers. It is estimated that for the five years 1933-1937 there emigrated permanently to Great Britain 74,800, casualties in a peace-time war
What a weird countrv to live in! Short of capital for ourselves we have to keep £230 million invested in another country; and our economists turn , pale with fear at the thought that we may be utilising some of these claims to develop our own country. Incidentally the Report disposes of the assumption that the mere recall or monies from abroad implies that we are living on our capital. “We have on hand an immense work of development… yet by some inscrutable decree we have to ship off our manhood to work as navvies for another country. With fertile tracts lying fallow and whole regions waiting to be reclaimed, we spend… about £4 million annually to relieve distress. And to the extent of over £2 millions we subsidise our farmers to export food for which our own people caannot afford to pay.” In addition to all this,, our people do not get married because they cannot afford it. ” Such a state of affairs is surely not only a menace to our future but also a serious call to us to fulfill our religious and social obligations to our fellow citizens.”
” In older days” says the Report ” this kind of thing was rather blasphemously placed under the aegis of Divine Providence.” Nowadays ” there are substituted references to the maintenance of sterling assets, and the lessening of dead-weight debt. But the real problem is to find out what changes in monetary policy might serve to prevent the progressive decline of the Irish nation, instead of using the fact of that decline as an argument for the limitation of public expenditure.” Here again we might note the fundamental difference in attitude between the two Reports. The Majority Report accepts the fact of the decline and frames its proposals on that basis. This Minority Report also accepts the existence of the fact, but proposes measures to remedy it.
The existence of the disease then is obvious. ‘ No less obvious is the cause People want food, houses, clothing. Producers would produce if there were enough people to buy their -wares. .Why cannot people buy ? Because they have no money. Hence the problem is how to provide that money. There is no use in saying that the present system ” is a neatly self-adjusting mechanism automatically providing purchasing power.” It has not done so, and a change must be made. This brings us to the remedy proposed.
The remedy is in general that consumers’ incomes be increased directly, without increasing producers’ cost; that there be a national plan of reconstruction and development capable of putting all our unemployed to work and developing our natural resources and that this development must be financed by a hew issue of. credits (and consequently increased legal tender). This programme entails ‘” certain changes in our present situation.
The link with Sterling:
If we are to carry out our programme, the Report says, we must have an independent international currency, i.e., we must creak the link with English sterling. Otherwise our domestic currency policy must be subordinated to the view of the British. Dealing with the statement in the Majority Report that ” It is not possible to give any credence to the idea that there is gross interference with the working of Irish economy by the Bank of England at present. Report says that no one supposes any crude interference. But economists admit that adherence to sterling means subordination to the veto of the Bank of Englanad. This means that no matter what is policy is adopted by the Bank of England, we must automatically fall into line, whether it suits our own interests or not .
This point is all the more important because of the great difference between the objects we wish to attain here and the objects pursued by British policy. Britain has a huge urbanised population. Her policy has been the importation of cheap food and raw materials. As a result she has to sacrifice her agriculture. The external exchange is of primary importance for her. But we in this country have espoused the ideal of self-sufficiency in essentials with the implied obligation to develop our national resources, and this we cannot do if we do not adopt a financial and credit policy suitable for the purpose. In brief then we may express the matter: being linked to sterling means that we must follow English policy, but we have aims and ideals different from those of England; hence if we wish to achieve our aims we must break the link with sterling.
The Report does not deal in detail with the other points of its programme. It contents itself with pointing out the main outlines ” as it is important to dissociate the idea from any doubtful analysis or theory.” The actual method of carrying out the programme it leaves to experts in the matter. We might finish our examination of the First Minority Report at this point, but I wish to call your attention to what it says on the question of inflation and foreign exchange.
” The great catchword in opposing any serious attempt at increasing purchasing power is ‘ inflation.’ ” The term is associated with panic which is often sedulously fostered in the uneducated public whose mentality is still in the epoch of metallic currency. Stimulation of money expenditure on commodities in whose production there is no unemployment will of course drive up the price of the existing output, for the simple reason that increased output cannot be produced. Whereas the present position that we wish to rectify is one in which men and resources are left idle, so that an increased money demand for commodities will lead to increased output and employment rather than to a rise in prices.” With regard to exchange ” the exchange rate with Great Britain, and with other countries, should be left to find chat level at which the payments and receipts in the ‘ balance of payments are equal.’ ” The Report points out that in this way a natural tariff would be extracted for our goods. Finally ” while we all cheerfully preach against irresponsibility, there is a counter-danger that some may not sufficiently guard against; that is the ultra-conservative stereotyping of private institutions to the detriment of the community A survey of our position entitles us to conclude that in addition to these private institutions, and not as superseding them—we need an organ for the issue and control of developmental credit. This is our fundamental conclusion, and the only thing startling about it is that it was not accepted sixteen years ago.”
Second Minority Report.
Professor Buste begins his report by pointing out a difficulty he experienced. In other countries, he says. a Commission would have the social objective defined, and would be asked to give expert advice as to the best method of attaining that objective. He then states his general position in regard to the question of State control of banking. He does not agree with those who advocate complete control by the State; neither does he agree that private enterprise in this sphere should be altogether uncontrolled. Questions of the allocation of credit and currency affect all members of society and hence should be subject to social control of some kind. The exact degree of supervision and State control is a matter for prudent judgement based on circumstances. In all those points, it will be noticed, he is it one with the signatories of the First Minority Report.
Present Position of Irish Currency and Credit:
Having stated that our present currency is English in all but name ” sterling painted green.” the Report then points out the social evils present in Ireland. In particular ” For a nation that places special value on the family and family life, the existence of abnormal celibacy is, of course, a fact to be deplored. Its basis is economic, and some social critics aver’ that the economic defects could be removed if the bankers administered credit in a more efficient manner.”
The Report, however, does not agree that the banks are to be blamed. They are engaged in the legitimate task of acquiring profit for their shareholders. Many of bankers deny that they create any credit, and hence maintain that they are not to be blamed for any shortage that may exist. ” Actually there are few individuals who can legitimately complain that the banks unduly restrict short term credit or charge undue rates (Irish rates are among the lowest in the world.”)
The real criticism of our present credit system is concerned with” two points ” neither of which is a criticism of the commercial banks as such.” (a) The lack of long-term credit for industry, trade, agriculture and public works. In connection with this the Report notes that while it is always possible to get long-term credits for enterprises that will be profitable, necessary capital will not be provided by banks or private enterprise for ; undertakings which though not profitable are of great social value, (b; The lack of purchasing power among the people. If everybody had more money, they would be better able to buy goods and services and everybody would enjoy ” plenty.” For neither of these points can the banks be blamed. ” The matter is one of public policy.”
If the public authority is to take an active part in dealing with the difficulties in our present system it will require substantial funds. These can be obtained by (a) taxation, (b) borrowing. Borrowing is approved of for important works the expenditure on which is large and non-recurring. In connection with this question debt the Report dwells at length on a distinction made in the Majority Report between “reproductive” debt and “dead weight” debt. ” If a government borrows in order to build a railway the earnings of which can be specifically earmarked for the service of that debt, some commentators would call the debt ‘ reproductive.’ If however the borrowing is for the building of roads which will not yield any direct income to the Government, which will not directly pay for themselves, the said commentators would call this ‘ dead-weight’ debt The implication in the word ‘dead-weight’ is that it is a type of debt which should not have been incurred, and that, if incurred, should be repaid as quickly as possible.” . The Report dealt strongly with both the distinction and the implication. Surely the issue here, and a very elementary issue at that, is not whether the investment will repay itself directly or indirectly, but whether it will repay itself. Much so-called ‘ reproductive ‘ debt can in fact be an undesirable social investment, and much so-called “dead weight” debt may represent a desirable ……….. (The End is missing from the report)
Lecture On Central Banking – Monday, October 13th. 1941
Rev. Chairman and Gentlemen,
I wish to speak to you this evening on the functions of a Central Bank. Since a Central Bank is primarily concerned with the creation and regulation of the currency of a country, it will be necessary for me to make a few remarks on currency and banking.. Admittedly, the subject is not a very simple one, but, in my opinion, the difficulties are often exaggerated, if not invented. Such difficulties as do arise result very often not from the complicated nature of the subject, but rather from a certain attitude on the part of the listeners. The average man has certain preconceived ideas about the nature of money, and the nature of banking, ideas that were applicable to money and banking centuries ago and persist to-day mainly because the old terms are retained in bank statements and handbooks to cover completely new realities. It is not easy to remove these ideas, and statements which run counter to them are apt to be greeted with: ” This thing is above me,” or ” I don’t trust these new-fangled theories.” The result is that the subject seems hard to understand because people will not try to understand. I feel it necessary then to assure you at the outset that I am not dispensing theories, new-fangled or otherwise. Even if, here and there, or perhaps everywhere, I seem to upset any of your preconceived notions, I would ask you not to reject what I say on that account merely, because I shall make no statement which is. not based on what the experts in the subject have to say.
I have stated that the primary function of a Central Bank is to create (if necessary) and regulate the currency or money of a country. What constitutes the money of a country? You will remember that in a former paper we discussed the ; meaning of the term “money” and decided that whatever may have been its meaning in former times, money to-day, is nothing more than a claim ‘against the community. This is expressed in another way by saying that money is anything which may be used in payment of a debt. Now, if we ask ourselves what do men use in payment of debts the answer will readily occur to everyone—notes and coins. Does the money of a community then consist simply of the total of its notes and coins? If that were so, our study of a Central Bank would end here. But a moment’s reflection will show that there is much more to the matter. The great bulk of our accounts and debts are settled not by notes and coins but by cheques drawn, against the deposits in our banks. In estimating the money of a community then we must reckon not merely the total of notes and coins but also the bank deposits of that Community. In fact, if we ask the man In the street how much money he has he will reply by adding up the notes and coins that he possesses and the amount he has in his bank account. We may take it then that the money or currency of a community consists, not merely of notes and coins but of these plus bank deposits. It may be contended that after all there is no real point in separating bank deposits or bank money from notes and coins. A man I may say that these deposits arose from; lodgements of notes and coins and therefore are not really distinct from them. We shall see in a moment whether that is so. For the present, in order to be quite clear on the matter, let us content ourselves with the statement that the money of a country, the currency which the Central Bank must regulate, is made up of notes and coins plus bank deposits or bank money.
This brings us to the question of banking. I ask for your particular attention here, as misconceptions in this matter are widespread, not least, it must regretfully be admitted, among Catholic authors. Let me quote a few statements on the function of a bank. ” In our modern economic organisation the principal function of the banker is that of receiver or giver of credit; he collects and concentrates under the form of deposits the disposable capital of the nation in order to place them at the disposal of those who can best make them fructify.” ” The banks should lend to the public, over [and above their own means only what they can borrow from the public.” Do you agree with these statements? Do you hold that a bank’s function is merely to lend out what it has received from its customers by way of deposit? It certainly sounds plausible, and represents, I think, the average man’s, idea of the function of a bank. Yet though it might be true of savings banks, as a statement of the function of ordinary commercial banks it is utterly erroneous and* misleading, and if adhered to, would effectually prevent us from understanding the operations of a central bank. Hence we must examine, however briefly, what happens when a bank lends money. Let us take by way of example a bank wherein a customer has deposited £1,000 in cash. We shall not bother with questions of the bank’s capital,, premises, etc., as they do not enter into the present question. The customer has deposited £1,000 and on the bank’s books he is credited with £1,000, while the amount of cash in the hands of the bank is £1,000 also. Now I go in and ask for overdraft accommodation up to £500. I draw out this amount by cheque get a house built and hand my cheque to the builder. He, as it happens, deals in the same bank and lodges my cheque there. Now what has resulted?. The builder is credited with £500, i.e. he has a deposit to that amount. Remember, that already the first customer has a deposit’ of £1,000. Hence the total of deposits now is £500 plus £1,000 = £1,500,: while the cash in the bank’s hands still remains at £1,000. In other words, in granting me the loan the bank has created a deposit of £500. You will remember that already we have agreed that bank deposits form part of the money of a community. Hence by this loan the money of the community has been increased to the extent of £500. (Here ends the Report).