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You misunderstand the role of modern banks: they're not there to protect your money, they exist to create money through credit. Everything else (payment routing
by toyg 5y ago
You misunderstand the role of modern banks: they're not there to protect your money, they exist to create money through credit. Everything else (payment routing and account management) is just an accessory, a necessary evil. They want your money in "safe" accounts only because the law forces them to keep around a certain amount of cash in case all that credit turns bad.
- kqr 5y agoThis is correct. One of the early and still accessible references is Bagehot's Lombard Street.
- dredmorbius 5y agoLombard Street by Walter Bagehot https://archive.org/details/in.ernet.dli.2015.276712 https://archive.org/details/in.ernet.dli.2015.276712 https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_of_the_Money_Market https://en.wikipedia.org/wiki/Lombard_Street:_A_Description_...
- baobabKoodaa 5y agoIt seems that you have misunderstood how banks create money through credit. Even if there was absolutely no requirement to keep a certain amount of cash, banks still couldn't create infinite money out of thin air, because that's not how it works. I wrote more about this here: https://www.attejuvonen.fi/money-out-of-thin-air/ https://www.attejuvonen.fi/money-out-of-thin-air/
- toyg 5y agoIt seems that you have misunderestood what my comment says, possibly in order to shoehorn a link to your blog. Please point out where I say that banks can "create infinite money out of thin air". I said they do the minimum that is necessary for them to be allowed to create money, which is what they exist for in the fractional-reserve system. Nobody else can emit the level of credit that banks can without getting shut down by the government.