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"No bank can't create cash like they want.", sadly they can. All they have to do is to lend some money.
by bertolo1988 9y ago
"No bank can't create cash like they want.", sadly they can.
All they have to do is to lend some money.
- SCdF 9y agoCan you go into more detail about what you mean here?
- reallymental 9y agoLeverage, banks hold the ability to lend a certain sum of money to multiple parties, thereby 'creating' more money. The amount of money lent vs the amount of parties is the leverage ratio. It's usually managed well, but can get out of hand pretty quickly. Edit: Forgot to mention reserve amounts. They are crucial.
- Retric 9y agoBanks don't create money. People treat IOU's after depositing money in banks as money, but they are IOU's not money. The difference may seem meaningless most of the time, but occasionally it becomes extremely important.
- tome 9y agoNo they can't. There are reserve requirements which limit the amount of bank deposits (not "money") a bank can create.