4 ms·
Yes. This is how banking has always worked, even before central banks. Being part of a central banking system basically just means that the liabilities (i.e. de
by jkhdigital 4y ago
Yes. This is how banking has always worked, even before central banks. Being part of a central banking system basically just means that the liabilities (i.e. deposits) created by all the member banks are fungible.
- civilized 4y agoBut this can't be done with physical currency. If I have to make loans in physical currency, I can't magically loan out $10 the moment I receive $1. I literally do not have the money to do this. Wasn't there ever a time when banking was done with physical currency? How did it work before electronic banking?
- drexlspivey 4y agoThe bank would issue IOUs (bank notes/promisory notes etc) that were redeemable 1-to-1 to the physical currency.
- jkhdigital 4y agoIOUs i.e. paper money. Transacting in hard currency is tedious and dangerous. A trustworthy bank is an absolutely essential component of anything beyond village-scale commerce.