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Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a

Fractional reserve banking isn’t how money is created, and loans are not made on deposits. That’s an outdated theory. Money is created simply by banks making a ledger entry (an asset and a balancing liability). Nothing more needed. Wish I had a great paper for you on this, I have seen some but blanking at the moment. Maybe a likeminded HN colleague can help out Edit: here is a decent start https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

wonder_er 4y ago
I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.
- alangibson 4y ago
  > _real_ money is backed by _real_ things This is not true, and it hasn't been for a long time. Even the idea of 'real' money is nonsense. Money is symbolic. Read something by Moser for a description of how money now works.
- hammock 4y ago
  Reading this I suspect there is a lot we don’t disagree on, namely the overwhelming relevance of purchasing power, and goods and services
- imtringued 4y ago
  >_real_ money is backed by _real_ things I'm not sure there is a more real thing than another person's labor, which is what people offer when they sign a debt contract. The way fiat works is effectively a time banking network with abstract currency units.
99_00 4y ago
The funny thing is that people who think that fractional reserve banking and money multiplier is a fraud will think that the reality of banking is even more of a fraud. >Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.

wonder_er 4y ago

I perceive that you don't agree with my frame, but it's not 'an outdated theory'. I linked to a book that explains it in great depth, not that I would expect anyone to read it. _real_ money is backed by _real_ things. What banks create when they make a ledger entry that creates new money isn't "real" money. It's fake money, but because of the fungible nature of money, their fake money gets mixed in with real money, growing the purchasing power of those who get it at the expense of reduced purchasing power of everyone else who has dollars. THAT ALL SAID! I appreciate the engagement, and my god if you wanna hash this out more I'd love a zoom call to see where we'd find "a failure to disagree". I suspect we'd agree on most things. BTW, love your username. I rode a moped from Denver to BC to Vancouver to Seattle and back, a few weeks ago, and of the 20+ days I was gone, spent 12 of them hammock camping. I love hammocks. They're perfect, in many situations.

alangibson 4y ago
> _real_ money is backed by _real_ things This is not true, and it hasn't been for a long time. Even the idea of 'real' money is nonsense. Money is symbolic. Read something by Moser for a description of how money now works.
hammock 4y ago
Reading this I suspect there is a lot we don’t disagree on, namely the overwhelming relevance of purchasing power, and goods and services
imtringued 4y ago
>_real_ money is backed by _real_ things I'm not sure there is a more real thing than another person's labor, which is what people offer when they sign a debt contract. The way fiat works is effectively a time banking network with abstract currency units.

99_00 4y ago

The funny thing is that people who think that fractional reserve banking and money multiplier is a fraud will think that the reality of banking is even more of a fraud. >Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England.