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You forgot to mention that the bank has $100,000 cash and a debt instrument (asset) that is worth more than $400,000 on its balance sheet after writing the $500
by quickthrowman 4y ago
You forgot to mention that the bank has $100,000 cash and a debt instrument (asset) that is worth more than $400,000 on its balance sheet after writing the $500,000 check to the seller.
Also, the question was ‘How does the government print money?’ and not ‘How does a bank lend money?’
- jollyllama 4y ago>You forgot to mention that the bank has $100,000 cash That much seemed obvious; of course they have the money you paid them. >and a debt instrument (asset) that is worth more than $400,000 on its balance sheet Yes, the buyer is now in their debt; this is of course why they do it. They give money now for money later. None of that changes the fact that the money still came out of the ether. >Also, the question was ‘How does the government print money?’ and not ‘How does a bank lend money?’ The topic is germane to the topic of monetary creation. Ultimately, the creation of debt is the creation of money and the destruction of debt is the destruction of money.