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Banks in theory have consequences for lending more than is reasonably available to them. The Fed really can create money out of thin air. That's a big differenc
by taysic 8y ago
Banks in theory have consequences for lending more than is reasonably available to them. The Fed really can create money out of thin air. That's a big difference.
- deleted 8y ago[deleted]
- brianpgordon 8y agoAs long as they satisfy their capital requirements, banks can lend as they please. They tend not to make really bad loans because directors are legally beholden to shareholders to ensure management is appropriately managing risk. The Fed doesn't tend to print trillions of dollars for no particular reason because it is legally beholden to its dual mandate. It's not that different. Yes the Fed can create "reserve currency" and banks can only create "commercial currency" but the distinction is a technical one and doesn't have a whole lot of macroeconomic impact.
- taysic 8y agoThe Fed has mandate that has nothing to do with the motivation of the banks. That's a huge difference - they create money for entirely different reasons. And yes, the Fed has an enormous macroeconomic impact obviously.
- brianpgordon 8y agoI don't think you actually responded to anything that I said, so I'm not sure how to reply. Did you just sort all of the words in my comment and pick some at random to respond to?
- deleted 8y ago[deleted]