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Guess you disagree with the Bank of England. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/ http

Guess you disagree with the Bank of England. https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/ https://bankunderground.co.uk/2015/06/30/banks-are-not-inter... Or Werner, the guy who coined the ideas behind the (since basterdized) QE: http://www.sciencedirect.com/science/article/pii/S1057521914001070 http://www.sciencedirect.com/science/article/pii/S1057521914... Banks are not intermediaries. Just where do you think all the new money is coming from?? $100K used to be worth something, it's worth sweet FA now for land. Banks issue money against land. There are two tiers of pricing as a result: 1. land - insane increase 2. everything else - mostly falling in price Banks are the new churches, vast open receptions with hundreds of square feet to be in awe of in city centers.

sokoloff 10y ago
Banks do indeed create money via lending, but that process is not infinite. It's "fractional reserve banking" not "zero reserve banking".
- mattgibson 10y ago
  That may no longer be true. Using mortgage backed securities in the way that triggered the financial crisis of 2007 effectively allows banks to bypass the fractional reserve mechanism. With this process, the bank lends $1 creating a new $1 new deposit from thin air as they always have, but then start using the mortgage certificate as money to by selling it. This allows a $1 loan to create an extra $2 in new money instead of an extra $1. If we only allow a fractional reserve of 80%, then $1 would previously have created an 80c new deposit, which in turn would create a 64c deposit on the next cycle and keeps diminishing. However, with the mortgage certificate thrown in too, $1 becomes $1.60 (80c of new deposit and 80c of sellable mortgage certificate), which becomes $2.56, which becomes $4.10 etc. This process is detailed by Greg Pytel here: https://gregpytel.blogspot.co.uk/2009/04/largest-heist-in-history.html https://gregpytel.blogspot.co.uk/2009/04/largest-heist-in-hi...
- branchless 10y ago
  Nope, have a read of those links. Also when banks create this gets credited to other banks. And they lend and that, on average gets credited to their bank. The system bootstraps itself. Lending is only constrained by willingness to borrow, and in the new financialised world only playing money games gets you rich. Read the links.

sokoloff 10y ago

Banks do indeed create money via lending, but that process is not infinite. It's "fractional reserve banking" not "zero reserve banking".

mattgibson 10y ago
That may no longer be true. Using mortgage backed securities in the way that triggered the financial crisis of 2007 effectively allows banks to bypass the fractional reserve mechanism. With this process, the bank lends $1 creating a new $1 new deposit from thin air as they always have, but then start using the mortgage certificate as money to by selling it. This allows a $1 loan to create an extra $2 in new money instead of an extra $1. If we only allow a fractional reserve of 80%, then $1 would previously have created an 80c new deposit, which in turn would create a 64c deposit on the next cycle and keeps diminishing. However, with the mortgage certificate thrown in too, $1 becomes $1.60 (80c of new deposit and 80c of sellable mortgage certificate), which becomes $2.56, which becomes $4.10 etc. This process is detailed by Greg Pytel here: https://gregpytel.blogspot.co.uk/2009/04/largest-heist-in-history.html https://gregpytel.blogspot.co.uk/2009/04/largest-heist-in-hi...
branchless 10y ago
Nope, have a read of those links. Also when banks create this gets credited to other banks. And they lend and that, on average gets credited to their bank. The system bootstraps itself. Lending is only constrained by willingness to borrow, and in the new financialised world only playing money games gets you rich. Read the links.