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This article is misleading. Banks do ultimately create money. Even if you ignore the details and complexity of how this works, the empirical evidence is clear:

This article is misleading. Banks do ultimately create money. Even if you ignore the details and complexity of how this works, the empirical evidence is clear: - How do you explain that the M2 money supply is always going up? Where is all that new money entering into the system? Government contracts funded by government bonds? If that was the case, government contractors would be getting very wealthy and everyone would be working for them (directly or indirectly)... - How do you explain the recent, significant, almost instantaneous jump in stock prices of major tech companies after the Fed printed and injected trillions of new dollars into the economy? Did these corporations all suddenly score huge government contracts from the bonds which the government created? Seems more like investors and company insiders used loan money from banks to do stock buybacks or increase their positions. - Under the model suggested by the article, how does one explain why there are so many millionaires are in the real estate industry? If you assume the opposite argument that banks are able to print money (directly or indirectly), the number of millionaires makes perfect sense since everyone buys houses using 'loans' from banks; so it's natural that all this free money from banks would constantly inflate real estate prices; each new generation of citizens would inflate the prices of the properties which were bought by the previous generation with increasingly larger loans from newly printed credit from their banks. What is claimed by the article does not match the evidence, even the people have wised up to this scheme which is why Bitcoin and cryptocurrencies have been able to hold their value.

baobabKoodaa 6y ago
Yes, banks do create money. This is said in the article multiple times, if you would like to read it.
- zimablue 6y ago
  The key question or claim is not whether banks create money but whether the way in which they are able to do it is unique. "creating money" is ambiguous to be nearly meaningless, "creating money in a way that noone else is able to" is a lot less ambiguous
  - cryptica 6y ago
    People and other non-bank entities do not create money, they create and attempt to sell contracts to the bank which are supposedly backed by the value of future goods and/or services. The bank is the one which decides if a contract is worth what the seller is claiming. The seller could claim that they own a lot of user data and that this data is a valuable intangible asset and if the bank agrees with this valuation, then that person can get access to a lot of credit. Nonetheless, this is all irrelevant, people cannot legally create money (that would be counterfeiting), they can only create assets; only banks can create money and they can cherry-pick who is allowed to get credit and who isn't using whatever rules or metrics they see fit. All the new money enters the economy through loans and government bonds. Companies and individuals who are close to the money printers get most value out of the new money since they get it first (Cantillon effect). By the time inflation kicks in, these people who are close to the money printer will be able to take another bigger loan in the future using their existing collateral which will undoubtedly be worth more due to inflation in the nominal monetary 'value' of that collateral.

baobabKoodaa 6y ago

Yes, banks do create money. This is said in the article multiple times, if you would like to read it.

zimablue 6y ago
The key question or claim is not whether banks create money but whether the way in which they are able to do it is unique. "creating money" is ambiguous to be nearly meaningless, "creating money in a way that noone else is able to" is a lot less ambiguous
- cryptica 6y ago
  People and other non-bank entities do not create money, they create and attempt to sell contracts to the bank which are supposedly backed by the value of future goods and/or services. The bank is the one which decides if a contract is worth what the seller is claiming. The seller could claim that they own a lot of user data and that this data is a valuable intangible asset and if the bank agrees with this valuation, then that person can get access to a lot of credit. Nonetheless, this is all irrelevant, people cannot legally create money (that would be counterfeiting), they can only create assets; only banks can create money and they can cherry-pick who is allowed to get credit and who isn't using whatever rules or metrics they see fit. All the new money enters the economy through loans and government bonds. Companies and individuals who are close to the money printers get most value out of the new money since they get it first (Cantillon effect). By the time inflation kicks in, these people who are close to the money printer will be able to take another bigger loan in the future using their existing collateral which will undoubtedly be worth more due to inflation in the nominal monetary 'value' of that collateral.