2 ms·

> Central banks may issue cash but banks can issue credit based on someone else's debts. If you mean deposits, then you're describing fractional reserve bankin

• cinquemb 6y ago
  Only if one think's there is no rehypothication going on of collateral (i.e. someone else's debts in the form of government bonds, corporate bonds of all grades, or even stock [which are liabilities on corporate balance sheets]) that is on deposit with some party…
• noxer 6y ago
  Ofc the central bank is in control that's the whole point of the central bank. But the central bank does not single-handedly control the money supply it controls the value to other currencies by buying/selling stuff to maintain a somewhat stable local currency. Which is more or less the main task of a central bank. But commercial banks multiply the money supply by creating credit out of thin air. Fractional reserves are just a trick to prevent a collapse when a bank run happens. It doesn't change the way the system works. Also fractional reserve have been abolished in most places because they are essentially useless if bank runs are physically no longer possible because people dont use or want cash anymore and they think the money they have is on that plastic card. The people are no longer capable of creating shortages. The digital debt balances can be moved around however much people want the bank does not need any reserves for that.