Banks do not collapse even though they have insufficient reserves for the reason that, because of deposit insurance, bank deposits are like cash and are suitable payment to the Government for taxes. Bank deposits become a form of money (recognised by the Government and suitable payment for taxes) because of the guarantee. Bank deposits are money because the Government declares them to be so.
If the value of bank deposits is guaranteed by the State then they will always be suitable for the payment of taxes.
If bank deposits are guaranteed then they will be suitable for the payment of taxes.
A fiduciary medium or commodity (in a fiat economy, where the fiat currency is prevalent and dominant) has value if it can settle tax debts. Bank credit is able to settle tax debts because it is guaranteed, the guarantee must, we can assume, mean that it will be suitable to settle tax debts. It would be a contradiction for the credit to be guaranteed by the State and to not be suitable in the payment of taxes. If bank credit is not acceptable to the State in the payment of taxes then we can say that it is not truly guaranteed, conversely if the guarantee is true then it must always be a suitable medium with which to settle tax debts.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment