120. The Nationalisation of the Banks and the Unified People’s Bank. The Bank as a central Book-keeping Establishment.
Few workers have a precise idea of what banks are, and what their function is in capitalist society. They conceive a bank to be a sort of huge treasure chest in which rich folk hoard money. The workers who have any savings and put them in a bank know that interest is paid upon these deposits, and they are aware that money deposited in a private bank sometimes vanishes. The savings are lost.
The first thing we have to understand is that a bank is not a money-box. At any given moment there is very little ready money in the bank. The essence of banking business is something quite different from the functioning as a fireproof safe for the money of people who have saved money. It is quite true that hundreds of millions of savings are paid into the bank, but these sums do not lie unused in the strong boxes. The money which flows into the banks is immediately put into circulation again. In the first place, it is lent to entrepreneurs who found factories, exploit workers, and pay part of their gains to the banks as interest on the loan — the bank, in its turn, paying part of its profits to its depositors. In the second place, the banks themselves found new undertakings with the funds they receive from depositors, or they finance extant undertakings. Finally the banks lend money to various States,1 on which these States pay interest. Thus, through the instrumentality of the governments, the banks plunder the populations of the debtor States. Inasmuch as the