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> 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
by gridlockd 8y 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 8y agoYou'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 8y 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.
- perl4ever 8y agoDo you think banks destroy money?