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>"commercial banks invest my money on my behalf without me having any control over the process" This is completely wrong. Your money on your bank account doesn

by noxer 6y ago

>"commercial banks invest my money on my behalf without me having any control over the process" This is completely wrong. Your money on your bank account doesn't exist. What you see is the number of dollars the bank owes you. Its a debt. They dont invest your money anywhere. It doesn't exist. When someone transfers "money" to you the bank subtractions debt from their account and adds it to yours. Its still the same debt they just owe it to someone else now. If they give you credit for example because you want to build a house. They create the credit out of thin air by putting the house on the balance sheet so they can give out credit worth as much as the house. You pay it back and the house is yours you dont pay and the house goes to the bank. Your own money is used first so the house is allays worth more than what the bank credited at any point in time. Nowhere does the bank need someone else's money to give you that credit.

perfunctory 6y ago
Yes, money is debt and debt is money. That’s clear. But banks do like to attract new deposits cause it has an effect on how much credit they can create. They can’t just create infinite amount.
- noxer 6y ago
  That's wrong. Read it again especially the last part "Nowhere does the bank need someone else's money to give you that credit." They cant credit infinite amount because there is no infinite no-risk demand for credit. Banks dont give credit where there is a risk to lose. That's why startups need VC and not a bank credit. Banks attract certain deposit holders because they are future house builder or otherwise customers of something the bank actually makes profit with. They dont care about the money deposited but if its more its more likely to be a customer they can make profit with. So yes they are interested in you as a customer if you have money but not because you store it there and they want to use it for something. Its one of the most taught lies about how money and banks work.
  - perfunctory 6y ago
    what about the reserve requirement?

by noxer 6y ago

perfunctory 6y ago

Yes, money is debt and debt is money. That’s clear. But banks do like to attract new deposits cause it has an effect on how much credit they can create. They can’t just create infinite amount.

noxer 6y ago
That's wrong. Read it again especially the last part "Nowhere does the bank need someone else's money to give you that credit." They cant credit infinite amount because there is no infinite no-risk demand for credit. Banks dont give credit where there is a risk to lose. That's why startups need VC and not a bank credit. Banks attract certain deposit holders because they are future house builder or otherwise customers of something the bank actually makes profit with. They dont care about the money deposited but if its more its more likely to be a customer they can make profit with. So yes they are interested in you as a customer if you have money but not because you store it there and they want to use it for something. Its one of the most taught lies about how money and banks work.
- perfunctory 6y ago
  what about the reserve requirement?