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We already had private money creation; every time a bank makes a loan, money is created. Governments don't directly control the money supply, they only do so i
by not2b 6y ago
We already had private money creation; every time a bank makes a loan, money is created. Governments don't directly control the money supply, they only do so indirectly.
- 29athrowaway 6y agoAlso known as fractional reserve banking (the money can make loan more money than it has in its reserve). If someone tries to do a bank run the fed will supply the bank with missing money, in part, because the fed was created by private banks to counter bank runs.
- Smashure 6y agoBanks loan from their availabile capital no? They don’t just make up money for loans.
- elzbardico 6y agoClient A = 100 dollars client B = 0 dollars Bank passive = 100 dollars bank actives = 100 client b makes a loan of 70 dollars client A = 100 dollars client B = 70 dollars Bank passives = 170 bank actives = 170 Now client C needs a 100 dollars loan. 100 < 170. Bank actives 270 bank passives 270 …
- sendbitcoins 6y ago"And it is for this reason that although banks don’t need your money, they do want your money. As noted above, banks lend first and look for reserves later, but they do look for the reserves." https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp https://www.investopedia.com/articles/investing/022416/why-b...
- samkater 6y agoIn the simple savings-and-loan case, banks loan from their deposits. So technically it is the bank's available capital, but the capital belongs to someone else. If the bank has $1 million in deposits, it might decide it can safely loan out $100k, which in some sense increases the money supply.
- orwin 5y agoNo. Or maybe in really rare cases. One man savings are really another man debt. In reality, actors that can roll their debt do so (so states and companies with enough capital as collateral), allowing common men to have savings.
- 29athrowaway 6y agoNo, banks are allowed to loan more money than they have in reserves (they are allowed to have a fraction of a loan in their reserves = fractional reserve banking). As a result, money is created through each loan. https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier