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It doesn’t matter which bank the loan is deposited into. That doesn’t affect what’s happening here. I’m saying one bank because it’s easier to understand. If yo

It doesn’t matter which bank the loan is deposited into. That doesn’t affect what’s happening here. I’m saying one bank because it’s easier to understand. If you really want to be pedantic, sure, maybe bank 1 has $1 + interest and bank 2 has $0.90. That’s also possible But it’s important to get that money is not blindly created. It’s done because value is created at a faster rate than physical dollars. You can view banks as a service that invests your dollars. You give them money to loan out and receive some of the interest in compensation. You yourself can create “new money” by making a loan yourself. The new money is just the result of value creation.

gridlockd 7y ago
> It’s done because value is created at a faster rate than physical dollars. [citation desperately needed] I think you're just letting your imagination run wild on how things work and why that makes sense. > You yourself can create “new money” by making a loan yourself. No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money than can circulate and that can itself be the basis for new money creation. > The new money is just the result of value creation. The new money is the result of fractional reserve lending, period. Whether "value" is created along the way is absolutely not a given.
- b_tterc_p 7y ago
  > I think you're just letting your imagination run wild on how things work and why that makes sense. If value were not being created fast enough, then people wouldn’t be able to payoff the loans. The loans are made either to enable value creation (business loans) or to fund a purchase and the loan taker agrees to funnel their value creation (salary) back into it. > No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money than can circulate and that can itself be the basis for new money creation. Obviously I meant to someone else. Though perhaps this one is too hand wavey to be useful
- perl4ever 7y ago
  "No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money" If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves, then we would instantly have runaway unimaginably huge inflation and everything would collapse. So even if you don't understand why it's not true, common sense should make you pause and look for that understanding.
  - gridlockd 7y ago
    > If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves... It is true. Assuming that banks are exerting their full capacity for lending, banks would be multiplying the money supply by 10. https://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation_process https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon... > ... then we would instantly have runaway unimaginably huge inflation and everything would collapse. That isn't true. If you get loan to buy something, that isn't free money. You're going to have to not buy other things to pay back the loan.
    - perl4ever 7y ago
      You're saying it's free money for the bank. So the banks would have all the money and nobody else would have any and the economy would collapse. Look, how do you know you're not the equivalent of a flat-earther? Is there any doubt in your mind about whether you have correctly understood the situation? When did you become convinced of your views?
      - gridlockd 7y ago
        > You're saying it's free money for the bank. I never said anything like that. I'm saying the bank is creating new money that is becoming part of the money supply. I gave you a Wikipedia link so that you can convince yourself. > Look, how do you know you're not the equivalent of a flat-earther? Wikipedia says what I am saying. > Is there any doubt in your mind about whether you have correctly understood the situation? That is a question that you really have to ask yourself.

gridlockd 7y ago

> It’s done because value is created at a faster rate than physical dollars. [citation desperately needed] I think you're just letting your imagination run wild on how things work and why that makes sense. > You yourself can create “new money” by making a loan yourself. No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money than can circulate and that can itself be the basis for new money creation. > The new money is just the result of value creation. The new money is the result of fractional reserve lending, period. Whether "value" is created along the way is absolutely not a given.

b_tterc_p 7y ago
> I think you're just letting your imagination run wild on how things work and why that makes sense. If value were not being created fast enough, then people wouldn’t be able to payoff the loans. The loans are made either to enable value creation (business loans) or to fund a purchase and the loan taker agrees to funnel their value creation (salary) back into it. > No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money than can circulate and that can itself be the basis for new money creation. Obviously I meant to someone else. Though perhaps this one is too hand wavey to be useful
perl4ever 7y ago
"No I can't. If I make a loan to myself, there is no new money to circulate. If a bank makes a loan on fractional reserves it is new money" If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves, then we would instantly have runaway unimaginably huge inflation and everything would collapse. So even if you don't understand why it's not true, common sense should make you pause and look for that understanding.
- gridlockd 7y ago
  > If that was true, that every loan by a bank was multiplying assets by 10, because they're required to hold 10% in reserves... It is true. Assuming that banks are exerting their full capacity for lending, banks would be multiplying the money supply by 10. https://en.wikipedia.org/wiki/Fractional-reserve_banking#Money_creation_process https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon... > ... then we would instantly have runaway unimaginably huge inflation and everything would collapse. That isn't true. If you get loan to buy something, that isn't free money. You're going to have to not buy other things to pay back the loan.
  - perl4ever 7y ago
    You're saying it's free money for the bank. So the banks would have all the money and nobody else would have any and the economy would collapse. Look, how do you know you're not the equivalent of a flat-earther? Is there any doubt in your mind about whether you have correctly understood the situation? When did you become convinced of your views?
    - gridlockd 7y ago
      > You're saying it's free money for the bank. I never said anything like that. I'm saying the bank is creating new money that is becoming part of the money supply. I gave you a Wikipedia link so that you can convince yourself. > Look, how do you know you're not the equivalent of a flat-earther? Wikipedia says what I am saying. > Is there any doubt in your mind about whether you have correctly understood the situation? That is a question that you really have to ask yourself.