In case you guys haven't seen this yet:
First published in the British humour magazine �Punch� on April 3, 1957:
Q: What are banks for?
A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesn�t bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to
reserves of $249,000,000,000 or thereabouts. That is the money they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that
too?
A: Not exactly. That is the money they use to make money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they haven�t got it?
A: No.
Q: Then how is it Assets?
A: They maintain that it would be if they got it back.
Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.
Q: But if they�ve got it, how can they be liable for it?
A: Because it isn�t theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people was Assets?
A: Yes.
Q: Then Assets and Liabilities must be the same thing?
A: You can�t really say that.
Q: But you�ve just said it! If I put $100 into my account the bank is liable to have to pay it
back, so it�s Liabilities. But they go and lend it to someone else, and he is liable to have to
pay it back, so it�s Assets. It�s the same $100 isn�t it?
A: Yes, but�.
Q: Then it cancels out. It means, doesn�t it, that banks haven�t really any money at all?
A: Theoretically��
Q: Never mind theoretically! And if they haven�t any money, where do they get their
Reserves of $249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.
Q: How?
A: Well, when they lend your $100 to someone they charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That�s their profit.
Q: Why isn�t it my profit? Isn�t it my money?
A: It�s the theory of banking practice that���
Q: When I lend them my $100 why don�t I charge them interest?
A: You do.
Q: You don�t say. How much?
A: It depends on the Bank Rate. Say a half percent.
Q: Grasping of me, rather?
A: But that�s only if you�re not going to draw the money out again.
Q: But of course I�m going to draw the money out again! If I hadn�t wanted to draw it out
again I could have buried it in the garden!
A: They wouldn�t like you to draw it out again.
Q: Why not? If I keep it there you say it�s a Liability. Wouldn�t they be glad if I reduced
their Liabilities by removing it?
A: No. Because if you remove it they can�t lend it to anyone else.
Q: But if I wanted to remove it they�d have to let me?
A: Certainly.
Q: But suppose they�ve already lent it to another customer?
A: Then they�ll let you have some other customers money.
Q: But suppose he wants his too�.and they�ve already let me have it?
A: You�re being purposely obtuse.
Q: I think I�m being acute. What if everyone wanted their money all at once?
A: It�s the theory of banking practice that they never would.
Q: So what banks bank on, is not having to meet their commitments?
A: I wouldn�t say that.
Q: Naturally. Well, if there�s nothing else you think you can tell me�.?
A: Quite so. Now you can go off and open a banking account!
Q: Just one last question.
A: Of course.
Q: Wouldn�t I do better to go off and open up a bank
First published in the British humour magazine �Punch� on April 3, 1957:
Q: What are banks for?
A: To make money.
Q: For the customers?
A: For the banks.
Q: Why doesn�t bank advertising mention this?
A: It would not be in good taste. But it is mentioned by implication in references to
reserves of $249,000,000,000 or thereabouts. That is the money they have made.
Q: Out of the customers?
A: I suppose so.
Q: They also mention Assets of $500,000,000,000 or thereabouts. Have they made that
too?
A: Not exactly. That is the money they use to make money.
Q: I see. And they keep it in a safe somewhere?
A: Not at all. They lend it to customers.
Q: Then they haven�t got it?
A: No.
Q: Then how is it Assets?
A: They maintain that it would be if they got it back.
Q: But they must have some money in a safe somewhere?
A: Yes, usually $500,000,000,000 or thereabouts. This is called Liabilities.
Q: But if they�ve got it, how can they be liable for it?
A: Because it isn�t theirs.
Q: Then why do they have it?
A: It has been lent to them by customers.
Q: You mean customers lend banks money?
A: In effect. They put money into their accounts, so it is really lent to the banks.
Q: And what do the banks do with it?
A: Lend it to other customers.
Q: But you said that money they lent to other people was Assets?
A: Yes.
Q: Then Assets and Liabilities must be the same thing?
A: You can�t really say that.
Q: But you�ve just said it! If I put $100 into my account the bank is liable to have to pay it
back, so it�s Liabilities. But they go and lend it to someone else, and he is liable to have to
pay it back, so it�s Assets. It�s the same $100 isn�t it?
A: Yes, but�.
Q: Then it cancels out. It means, doesn�t it, that banks haven�t really any money at all?
A: Theoretically��
Q: Never mind theoretically! And if they haven�t any money, where do they get their
Reserves of $249,000,000,000 or thereabouts??
A: I told you. That is the money they have made.
Q: How?
A: Well, when they lend your $100 to someone they charge him interest.
Q: How much?
A: It depends on the Bank Rate. Say five and a-half percent. That�s their profit.
Q: Why isn�t it my profit? Isn�t it my money?
A: It�s the theory of banking practice that���
Q: When I lend them my $100 why don�t I charge them interest?
A: You do.
Q: You don�t say. How much?
A: It depends on the Bank Rate. Say a half percent.
Q: Grasping of me, rather?
A: But that�s only if you�re not going to draw the money out again.
Q: But of course I�m going to draw the money out again! If I hadn�t wanted to draw it out
again I could have buried it in the garden!
A: They wouldn�t like you to draw it out again.
Q: Why not? If I keep it there you say it�s a Liability. Wouldn�t they be glad if I reduced
their Liabilities by removing it?
A: No. Because if you remove it they can�t lend it to anyone else.
Q: But if I wanted to remove it they�d have to let me?
A: Certainly.
Q: But suppose they�ve already lent it to another customer?
A: Then they�ll let you have some other customers money.
Q: But suppose he wants his too�.and they�ve already let me have it?
A: You�re being purposely obtuse.
Q: I think I�m being acute. What if everyone wanted their money all at once?
A: It�s the theory of banking practice that they never would.
Q: So what banks bank on, is not having to meet their commitments?
A: I wouldn�t say that.
Q: Naturally. Well, if there�s nothing else you think you can tell me�.?
A: Quite so. Now you can go off and open a banking account!
Q: Just one last question.
A: Of course.
Q: Wouldn�t I do better to go off and open up a bank