4 ms·

> it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power

by alexb_ 5y ago

> it's impossible to have a long-term system not based on gold or some other set of commodities, because it is impossible for a government to be given the power to print arbitrarily without eventually using it, unto the death of that currency. And this is why the US government isn't directly involved in the process, nor is it given the power to print money arbitrarily. Money is "printed" via a combination of loans and fractional reserve banking, and banks are incentivized to figure out the optimal interest rate to both produce the most amount of money for themselves while keeping a stable currency.

laurencerowe 5y ago
Aren’t interest rates set by the Fed? Banks then charge a rate based on the Fed base rate + risk premium.
- alexb_ 5y ago
  The fed is largely controlled by the Federal Reserve banks, which are independent entities and are run as private businesses.
throw0101a 5y ago
> Money is "printed" via a combination of loans and fractional reserve banking Fractional reserve banking is not a thing. Tobin called that "The Old View" in 1963: * https://cowles.yale.edu/sites/default/files/files/pub/d01/d0159.pdf https://cowles.yale.edu/sites/default/files/files/pub/d01/d0... It is a convenient crutch to get a '101' level understanding, but people end up continue to think it's real and so the teaching of money multiplier should really be stopped: * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier https://research.stlouisfed.org/publications/page1-econ/2021... Several countries haven't even had reserve requirements for decades: * https://en.wikipedia.org/wiki/Reserve_requirement#Canada https://en.wikipedia.org/wiki/Reserve_requirement#Canada Roche published a good intro to how the modern monetary system works: * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
- deleted 5y ago
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by alexb_ 5y ago

laurencerowe 5y ago

Aren’t interest rates set by the Fed? Banks then charge a rate based on the Fed base rate + risk premium.

alexb_ 5y ago
The fed is largely controlled by the Federal Reserve banks, which are independent entities and are run as private businesses.

throw0101a 5y ago

> Money is "printed" via a combination of loans and fractional reserve banking Fractional reserve banking is not a thing. Tobin called that "The Old View" in 1963: * https://cowles.yale.edu/sites/default/files/files/pub/d01/d0159.pdf https://cowles.yale.edu/sites/default/files/files/pub/d01/d0... It is a convenient crutch to get a '101' level understanding, but people end up continue to think it's real and so the teaching of money multiplier should really be stopped: * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier https://research.stlouisfed.org/publications/page1-econ/2021... Several countries haven't even had reserve requirements for decades: * https://en.wikipedia.org/wiki/Reserve_requirement#Canada https://en.wikipedia.org/wiki/Reserve_requirement#Canada Roche published a good intro to how the modern monetary system works: * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

deleted 5y ago
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