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> This would make licenses even more fungible than bank money is today: right now if a bank goes bankrupt, you might not see any money in your accounts, even th

> This would make licenses even more fungible than bank money is today: right now if a bank goes bankrupt, you might not see any money in your accounts, even though it's your money and you are no investor or anything. It's because every bank is "minting" it's own currency. There are models which are different where you have a central bank handing out digital money to the banks. Not true. Banks aren't minting their own money, and your money is insured. https://www.fdic.gov/ https://www.fdic.gov/

UncleEntity 8y ago
> Not true. Banks aren't minting their own money, and your money is insured. Totally true (aka fractional reserve banking) and is one of the main reasons (a portion of) your deposits are insured.
EliRivers 8y ago
They don't physically mint it, but they certainly create money out of nowhere to put into bank accounts that people can then go out and spend.
- ascorbic 8y ago
  There's a lot of misleading stuff said about fractional reserve banking. People imply that banks are allowed to just create as much new money as they want out of nowhere, when it just means lending some of the money that they've received in deposits. Sure it does increase the money supply, but it's not "minting their own currency".
  - nicoburns 8y ago
    > Sure it does increase the money supply Not only does it increase the money supply, but the extra money created belongs to the bank. It's pretty much equivalent to being able to print money (with the caveat that there are limit's on how much hey can "print"). We could have a system where that money was simply given to people, not given to banks who then loan it out to people. And IMO that would have a very positive effect om our economy.
    - ascorbic 8y ago
      It doesn't belong to the bank. They've borrowed it from the depositors, who can take it back at any time. It's only created in the sense that the person they've lent it to can spend it while the depositor still has it in their account. Edit: to illustrate this, try this thought experiment. Borrow $10 from a friend. Lend $5 of that to another friend. Congratulations, you've just increased the money supply by $5. That's the exact same method used by banks, but you'd not claim that you're now $5 richer or that you've effectively printed $5.
      - JetSpiegel 8y ago
        Fractional reserve banking is actually the opposite. Borrow 5 bucks from a friend (central bank) and lend 10 bucks to your clients. Your example does not increase yhe money supply. The ratio is closer to 11%.
        ascorbic 8y ago
        No, banks can't lend more than they borrow (and most of the money they borrow is deposits from customers and loans from other banks, not the central bank). They can lend part of the money they take in deposits, but they must hold a fraction of it in reserve – hence fractional-reserve banking. The minimum reserve is set in law.
      - EliRivers 8y ago
        Your thought experiment is, I believe, invalid. The bank does not hand around five dollar bills. The bank simply changes a number, and in doing so changes the contents of an account, increasing it by five dollars. Five dollars that can now be spent. I would argue that this five dollars has effectively been printed. It was magiced out of thin air. How is it not five dollars? I can spend it. I believe your thought experiment should be worded thus: Have a friend write "ten dollars" on a piece of paper (bank account), and give it to you. Everyone will accept this as ten dollars. Write "five dollars" on another piece of paper (bank account), and give it to another friend. Everyone will accept this as five dollars. All the other pieces of paper (bank accounts) that existed beforehand still exist. You now also have two new pieces of paper, which will be accepted as fifteen dollars. Fifteen dollars, magiced out of nowhere. This is how the banks do it; they just write on the bank account how much money is in it.
  - EliRivers 8y ago
    People imply that banks are allowed to just create as much new money as they want out of nowhere, when it just means lending some of the money that they've received in deposits I disagree. They are not simply lending out money that other people deposited. They created new money, out of nowhere. There is a limit on how much of this they can do, but they are not simply lending out money that other people deposited. The bank of England is pretty clear that this money is magiced up out of nowhere; that it is money that did not exist before. "Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account." https://www.bankofengland.co.uk/knowledgebank/how-is-money-created https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...
    - ascorbic 8y ago
      It's magiced out of nowhere because even though they need to take a deposit before they lend it, the original deposit remains as a line in the customer's account after it's been lent. It works because people don't normally all try to withdraw their money at the same time.
      - EliRivers 8y ago
        I don't disagree with that; I disagreed with the assertion that they weren't magicing it out of nowhere, but I see that you do actually state that it is magiced out of nowhere.

UncleEntity 8y ago

> Not true. Banks aren't minting their own money, and your money is insured. Totally true (aka fractional reserve banking) and is one of the main reasons (a portion of) your deposits are insured.

EliRivers 8y ago

They don't physically mint it, but they certainly create money out of nowhere to put into bank accounts that people can then go out and spend.

ascorbic 8y ago
There's a lot of misleading stuff said about fractional reserve banking. People imply that banks are allowed to just create as much new money as they want out of nowhere, when it just means lending some of the money that they've received in deposits. Sure it does increase the money supply, but it's not "minting their own currency".
- nicoburns 8y ago
  > Sure it does increase the money supply Not only does it increase the money supply, but the extra money created belongs to the bank. It's pretty much equivalent to being able to print money (with the caveat that there are limit's on how much hey can "print"). We could have a system where that money was simply given to people, not given to banks who then loan it out to people. And IMO that would have a very positive effect om our economy.
  - ascorbic 8y ago
    It doesn't belong to the bank. They've borrowed it from the depositors, who can take it back at any time. It's only created in the sense that the person they've lent it to can spend it while the depositor still has it in their account. Edit: to illustrate this, try this thought experiment. Borrow $10 from a friend. Lend $5 of that to another friend. Congratulations, you've just increased the money supply by $5. That's the exact same method used by banks, but you'd not claim that you're now $5 richer or that you've effectively printed $5.
    - JetSpiegel 8y ago
      Fractional reserve banking is actually the opposite. Borrow 5 bucks from a friend (central bank) and lend 10 bucks to your clients. Your example does not increase yhe money supply. The ratio is closer to 11%.
      - ascorbic 8y ago
        No, banks can't lend more than they borrow (and most of the money they borrow is deposits from customers and loans from other banks, not the central bank). They can lend part of the money they take in deposits, but they must hold a fraction of it in reserve – hence fractional-reserve banking. The minimum reserve is set in law.
    - EliRivers 8y ago
      Your thought experiment is, I believe, invalid. The bank does not hand around five dollar bills. The bank simply changes a number, and in doing so changes the contents of an account, increasing it by five dollars. Five dollars that can now be spent. I would argue that this five dollars has effectively been printed. It was magiced out of thin air. How is it not five dollars? I can spend it. I believe your thought experiment should be worded thus: Have a friend write "ten dollars" on a piece of paper (bank account), and give it to you. Everyone will accept this as ten dollars. Write "five dollars" on another piece of paper (bank account), and give it to another friend. Everyone will accept this as five dollars. All the other pieces of paper (bank accounts) that existed beforehand still exist. You now also have two new pieces of paper, which will be accepted as fifteen dollars. Fifteen dollars, magiced out of nowhere. This is how the banks do it; they just write on the bank account how much money is in it.
- EliRivers 8y ago
  People imply that banks are allowed to just create as much new money as they want out of nowhere, when it just means lending some of the money that they've received in deposits I disagree. They are not simply lending out money that other people deposited. They created new money, out of nowhere. There is a limit on how much of this they can do, but they are not simply lending out money that other people deposited. The bank of England is pretty clear that this money is magiced up out of nowhere; that it is money that did not exist before. "Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account." https://www.bankofengland.co.uk/knowledgebank/how-is-money-created https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...
  - ascorbic 8y ago
    It's magiced out of nowhere because even though they need to take a deposit before they lend it, the original deposit remains as a line in the customer's account after it's been lent. It works because people don't normally all try to withdraw their money at the same time.
    - EliRivers 8y ago
      I don't disagree with that; I disagreed with the assertion that they weren't magicing it out of nowhere, but I see that you do actually state that it is magiced out of nowhere.