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I think banks "create" (out of "no where" I mean) the money they loan. So they don't owe anyone.
by Phenix88be 7y ago
I think banks "create" (out of "no where" I mean) the money they loan. So they don't owe anyone.
- xxs 7y agoof course this is not true, the credits are sold and resold, etc.
- 6510 7y agoIt involves a lot more parties but the level of control over the game mechanics is almost the same as a video game. It is actually a very constructive way of looking at it. All rules of the game can be suspended when it hurts gameplay.
- ptah 7y agonot sure why you are being downvoted as if fractional reserve banking is not the status quo
- gruez 7y agoThat's not relevant in the context of this discussion because at the end of the day, someone is not getting those interest payments. Sure, you can argue the money is still there (in the form of debt), but that doesn't help whatever entity that requires the cash now.
- ianleeclark 7y agoWhy do you believe some entity needs the cash now?
- robjan 7y agoOther entities may not forgive the banks for failing to make repayments on their loans. There are also instruments such as bonds and fixed income which may be backed by mortgages.
- deleted 7y ago[deleted]
- ptah 7y agothe money is not from other entities. it is literally made up based on a fraction of the reserves the bank holds. https://en.wikipedia.org/wiki/Fractional-reserve_banking https://en.wikipedia.org/wiki/Fractional-reserve_banking
- jonplackett 7y agoAnyone who wants to understand this insanity, I recommend MONEY AS DEBT https://www.youtube.com/watch?v=2nBPN-MKefA https://www.youtube.com/watch?v=2nBPN-MKefA The first time I saw it I thought it was a luny conspiracy theory, but NO. It's all true.
- aguyfromnb 7y ago>It's all true. This is not a surprise to anyone who understands how a modern monetary system works. I guess this is why Bitcoin and its "there's a set amount of currency and we know exactly what it is" is so popular with people of a certain mindset; they expect that's how money works.
- jonplackett 7y agoThat's my point though - most people have no idea how the modern monetary system works. Most people have no idea banks have the power to create money. They think they're lending other people's money.
- Scarblac 7y agoNot quite. They get money from somewhere, that they loan out. But because much of the money they got from somewhere can be requested at will (people can still remove money from their accounts), it is still liquid and still counts as money. So money is "created" this way. That is how they create money. They don't literally just create whatever they need, only central banks can do that.
- nicky0 7y agoActually the banks do just create the money. They put an entry on the balance sheet "they owe us this much" and call it an asset.
- afiori 7y agoThat is creating liquidity, what they are doing is essentially selling debt. It is different from just creating money.
- glofish 7y agoYou are pre-selling your own work and productivity. That value that backs up that money will be created by you.