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Because they think they are banks and all banks fractionally reserve. Fractionally reserving is not a law of nature, it's a scam that only works because the fe
by narrator 4y ago
Because they think they are banks and all banks fractionally reserve. Fractionally reserving is not a law of nature, it's a scam that only works because the fed can print money as needed to bail out banks when there's a bank run. If you can't just print money whenever, it always fails.
- csomar 4y agoThat's a misconception. Banks don't fraction-reserve out of thin air. They need a collateral (which is why banks require it for a loan).
- narrator 4y agoCredit cards are collateral free. In contrast, when people get medical bills they also owe debt, but the hospital didn't create any money.
- csomar 4y agoI don't think so, the bank will need to collateralize these debts somehow (ie: Lenders). The yield on CC debt is high. For medical bills, that's a false and yet correct analogy. The hospital did, in theory, create money out of thin air (at least from an accounting perspective). In this case, it is the hospital (ie: The investor) who will go under if the patient does not pay her bill. And that's fine. Investors are in it for yield which carries risk. This is different from putting money on an exchange or a bank. You are looking here for a store, unless you willingly signed up for some yield thing.
- narrator 4y agoThe bank created money because the borrower can use the money to settle other debts. When the creditor that the debtor repays with the credit card deposits those payments in bank accounts they become bank deposits in other banks. The hospital patient cannot settle debts with his medical care that he received or deposit it in a bank.