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You misunderstood. With the "Fractional Reserve Banking" system, banks lend out money that is NOT under deposit. They are licensed to lend out money created fro

You misunderstood. With the "Fractional Reserve Banking" system, banks lend out money that is NOT under deposit. They are licensed to lend out money created from nothing. This is the mechanism by which money is created https://courses.lumenlearning.com/boundless-economics/chapter/creating-money/ https://courses.lumenlearning.com/boundless-economics/chapte...

lenticular 7y ago
Yes everyone knows this. However, the difference is regulation, collateral, and FDIC insurance. There's been a huge number of instances of exchanges or other parties screwing over Bitcoin users, but there has not been a single loss of bank deposits since the FDIC has existed. No one is actually checking that Tether backs their currency 100%, you know.
- deleted 7y ago
  [deleted]
- chimpburger 7y ago
  The person I was replying to actually did not know that. The irony is was that bank deposits are also a ponzi scheme like Tether. Deposits are backed by taxpayer bailouts in some countries. In New Zealand we have fractional reserve banking without the deposit insurance. It's a well regulated ponzi scheme but not guaranteed against a bank run.
kgwgk 7y ago
> banks lend out money that is NOT under deposit What do you mean? From that link: “banks lend out most of the deposits they have collected”, “keep a fraction of their deposits in reserve and may loan out the rest”. Obviously they can not hold and lend the money at the same time.
- chimpburger 7y ago
  They lend out MORE than was deposited. They literally create money out of nothing and lend it. That is how fiat money is created.
  - kgwgk 7y ago
    They don’t.
    - chimpburger 7y ago
      Believe it or not, this is an official, legal mechanism of money creation. https://en.wikipedia.org/wiki/Money_creation#Fractional_reserve_theory_of_money_creation https://en.wikipedia.org/wiki/Money_creation#Fractional_rese...

lenticular 7y ago

Yes everyone knows this. However, the difference is regulation, collateral, and FDIC insurance. There's been a huge number of instances of exchanges or other parties screwing over Bitcoin users, but there has not been a single loss of bank deposits since the FDIC has existed. No one is actually checking that Tether backs their currency 100%, you know.

deleted 7y ago
[deleted]
chimpburger 7y ago
The person I was replying to actually did not know that. The irony is was that bank deposits are also a ponzi scheme like Tether. Deposits are backed by taxpayer bailouts in some countries. In New Zealand we have fractional reserve banking without the deposit insurance. It's a well regulated ponzi scheme but not guaranteed against a bank run.

kgwgk 7y ago

> banks lend out money that is NOT under deposit What do you mean? From that link: “banks lend out most of the deposits they have collected”, “keep a fraction of their deposits in reserve and may loan out the rest”. Obviously they can not hold and lend the money at the same time.

chimpburger 7y ago
They lend out MORE than was deposited. They literally create money out of nothing and lend it. That is how fiat money is created.
- kgwgk 7y ago
  They don’t.
  - chimpburger 7y ago
    Believe it or not, this is an official, legal mechanism of money creation. https://en.wikipedia.org/wiki/Money_creation#Fractional_reserve_theory_of_money_creation https://en.wikipedia.org/wiki/Money_creation#Fractional_rese...