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Everybody can create new money. Not just banks. Let me give you an example. I'm worth $100. We agree I lend you $1,000,000. Sure, I don't physically have $1,00
by lubos 11y ago
Everybody can create new money. Not just banks.
Let me give you an example. I'm worth $100. We agree I lend you $1,000,000. Sure, I don't physically have $1,000,000 but I can still make a loan to you and give you some piece of paper telling you you have $1,000,000 deposited with me. My assets have increased by $1,000,000 (loan amount) and my liabilities have increased also by $1,000,000 (what you have deposited with me). I'm still worth $100 but I created $1,000,000 of new money.
This is what commercial banks are essentially doing. It's not like they have some superpowers. Everybody can do this.
So I don't understand what's your point.
- bottled_poe 11y agoI'm pretty certain what you have described constitutes some form of fraud.
- bduerst 11y agoYou're both wrong. Come on. If you, private Bank Lubos, only have $100 on hand but have a customer who wants a $1,000,000 loan, you don't just write a piece of paper. You would go to the U.S. Fed Reserve (central bank) and take out a loan for $999,900 with interest.. The central bank creates the $999,000, and the private bank charges a premium on the interest rate.
- deleted 11y ago[deleted]
- bboreham 11y agoThe special thing that banks do is take deposits. This is tightly regulated in most countries. Anyone can lend money, as you say.
- crdoconnor 11y ago>This is what commercial banks are essentially doing. It's not like they have some superpowers. Everybody can do this. You can't create $1,000,000 in a spendable form. Banks can. What you have proposed is the creation of some sort of worthless security which, yes, anybody can do.