3 ms·

As an economist: yes.

• raxxorrax 7y ago
  How so if money is created by commercial banks today with a fictional multiplier for bonds (did I get that right?)? I believe money to be an intermediary, but it works because we all believe that it does have an inherent value. At least as long as it is relatively stable for the time frame between earning and spending. If I cannot use it for any form of saving, we had a primitive market of natural produce for any form of security. It don't think that financial assets are a widespread reality for most market participants. If there is at least the factor to theoretically restrict the creation of money, what mechanism would replace it? Trust in banks or the currency itself? Wouldn't that be practically the same? Or asked otherwise: What are the greatest problems with the current banking system?
  • ambernightcruse 7y ago
    Commercial banks don't create money, they create loans. And when loans are zeroed out they no longer exist. There's interest that is earned as revenue and eventual profit, but only the Treasury creates money. Money doesn't work on faith. Money is debt. The currency issuer takes on debt(the US government.) The debt is coined/minted/printed to fulfill some government budget. These dollars go to people to build/work/service the programs. The government coerces people into working by raising a tax. If the government runs a deficit, then the private sector has a net positive gain. If the government runs a surplus, then the private sector has a net loss(e.g., austerity.) You don't want to restrict the creation of money if the economy is expanding. You want the money supply to grow or else you will have deflation.