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His point is that most money is indeed created out of thin air through the mechanism of fractional reserve banking and the creation of debt. This happens even
by smallnamespace 6y ago
His point is that most money is indeed created out of thin air through the mechanism of fractional reserve banking and the creation of debt.
This happens even if the monetary 'base' remains a fixed quantity, like bullion gold.
- dnautics 6y agoYes, but minimally you can create disclosure regulations requiring entities that are lending to disclose the level of leverage they are operating at. Customers can then discriminate when they deposit based on withdrawal risk.
- beefield 6y agoSorry, your comment made me laugh a bit. You know, before the smartest guys were incentivized to figure out how to make you and me click ads, they were incentivized to figure out how to circumvent financial regulation. Turned out that it is really, really f*cking hard to write a regulation that can't be somehow gamed. And even if it was not, you need to remember that vast majority of people do not know how to handle percentages, it is quite naive to expect that those people could make any rational judgements based on any financial disclosures whatsoever. Just look around, Madoff managed to con quite a few sophisticated investors, and to anyone with any common sense Tether has been behaving exactly as if they would be doing their best to scam the whole crypto scene - and nobody cares or requires disclosures.
- spiralx 6y agoFractional reserve banking doesn't actually model how banks work in the modern economy though - they don't lend out deposits, they just add a figure to the customer's account and add a matching loan to their assets, literally creating money. They could do this without any deposits at all.