The modern idea of commercial banking involves the creation of deposits by double-entry bookkeeping without money, meaning the deposits are not backed by legal tender money -- which was learned from the goldsmith bankers of London in the 1600s, the lessons taught by John Law of Lauriston and the failure of his Banque Generale Privee ( later known as Banque Royale) in Paris in 1720, and the Bank of Amsterdam founded 1609, closed in 1819 -- making bank deposits a highly questionable thing, and commercial banking one of the riskiest businesses around, as demonstrated during the Savings & Loan crisis of the 1980s when 2,790 American banks failed.
The basic idea of banking has been made complex by the law, rules and regulations intended to counter-act the risks inherent in bank-deposit creation without money, requiring minimum reserves in the form of legal tender held at the central bank, and a sheer maze of rules developed by the Basel Committee on Banking Supervision (BCSC) at the Bank for International Settlements (BIS) since 1988 which have not prevented the Global Financial Crisis of 2007, which is ongoing with no end in sight. The sound reform movements since the 1930s, eg. the Chicago Plan and Irving Fisher’s 100% money system, have been quashed at the alarmed resistance of private bankers and are discussed in detail in the chapters that follow below.
The book is a desk top compendium for professional bankers, discussing both the historical development and current practices, rules and regulations including the much feared Basel III Capital and Liquidity requirements. The book is also a rather complete course for the college students to wet their appetites for a rewarding career full of excitement. “Money plays the largest part in determining the course of history,” wrote Karl Marx in the Communist Manifesto (1848), and Henry Ford (1922) added his memoirs: “It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”
The author was trained as a banker in Germany, worked in Switzerland under the high-finance author Paul Erdman, and moved up the ranks to corporate credit at a Canadian chartered bank in Toronto. He left banking to become a controller of multinational companies, and later an articled student with chartered accountants and a licensed CPA in the State of Washington. He is a university professor for accounting and finance in Southeast and Central Asia, and a founding director of the IICPA and the business school accrediting agency, AASBI. Schemmann is an outspoken critic of the current banking practices, the violations of accounting concepts and principles enshrined in IFRS, and has written widely on matters of money and banking, beginning in 1992, resulting in correspondence with ministers of finance and governors of central banks.