Anne Mayhew writes:  
 
" 'With what do investors invest, if not the savings of  
households?'  Well, Schumpeter and lots of other economists have said  
that banks provide the finance.  The answer still seems to me to be a  
pretty good one." 
 
My response: And from where do the banks get their "finance"? 
 
In fact, Keynes says what Schumpeter and others have said about  
"finance" in the General Theory.  Dennis Robertson, for example,  
referred to Keynes's definition of finance as a "verbal monstrosity,"  
especially since it is divorced from saving. 
 
But here is a quick check.  Take a bank's balance sheet.  You will  
find that it's deposits (Liabilities to customers) equal its reserves  
(primary and secondary) and extended credit or loans (Assets).  This  
shows that banks in fact lend LESS than customers deposit with them. 
 
As Larry Moss hinted earlier, the view that savings were not a  
primary requirement for growth was long dismissed before Keynes came  
on the scene.  David Ricardo (Works 3, 92) in dismissing the claim  
that banks were such powerful engines of growth by themselves finally  
exclaimed: "To what absurdities would not such a theory lead us!" 
 
The fact that some "big" names are associated with the unfortunate  
confusion in the literature should not deter us from looking at it  
afresh or correcting it, Anne. 
 
James Ahiakpor 
Department of Economics 
CSUH, Hayward