Vague Lending

If I lend you my combiner harvester, you would not record it as an asset on your balance sheet. Yet that it was banks do, when I deposit money with them for safe keeping. This gives them the right to lend the money to someone else. I think the money belongs to me and is ready for me to use whenever I want it. They have given it to someone else. If my friend gave my combine harvester to someone else to use without asking me first, I would be a bit upset. However banks do this all the time.

I would not promise my combine harvester to another person without checking when they planned to do their harvest. I would want to make sure my harvest would be done first, or that they would be completed theirs, before mine was ready. The agree would sort this stuff out, so that I was no left in a situation where I lost my harvest.

Our contracts with banks are too vague. People depositing money in a bank have different intentions.

• Some will be transactions money left in my bank between payday and when my rent is due, or I can get to the supermarket to buy my groceries.
• Some is money that I do not want to use for a while, because I am saving to buy a new computer in about six months time.
• Some will be long-term savings for when I retire.

The bank does not know my intentions. We need deposits with contracts appropriate for the various purposes for which I deposit money in the bank.