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This is not true. You can spend up to a dollar, because you’re spending from your bank account and everyone trusts that you’re allowed to take up to a dollar. D

This is not true. You can spend up to a dollar, because you’re spending from your bank account and everyone trusts that you’re allowed to take up to a dollar. Dollars a fungible, so you’ll be taking someone else’s dollar, but that’s ok, because not everyone needs their dollar at once. Bob can spend 90 cents because he has 90 cents, though he is obligated to pay it back later. The bank can loan out (in this example) 81 cents of the 90 cent deposit from bob.

qaq 7y ago
Do you understand what run on the bank is ? Do you understand a difference between physical world and a theory that is used for macro economic modeling? Because majority of people are under FDIC limits and basically attribute 0 counterparty risk when dealing with their own bank the net economic effect can be modeled using a theory that you are quoting in very simplified terms. Any given bank can only operate using deposits they have not loaned out if they run out of that FDIC will take over (greatly simplifying obviously banks can borrow money against their assets, loan portfolio etc.). So in real world terms the only bank that creates money out of thin air is FED.