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I guess it's unclear what you mean by "creating money". Anytime I lend money to someone, they're going to spend it on something. They have a liability (their d
by karpierz 4y ago
I guess it's unclear what you mean by "creating money". Anytime I lend money to someone, they're going to spend it on something.
They have a liability (their debt to me) and an asset (the thing they "bought", which could be anything from a T-bill, to a bagel). Basically, any debt "creates money."
- olalonde 4y agoIf you lend money to someone, it's no longer available for you to spend. However, if a bank loans out the money that you deposited, both the borrower and you can spend it. This is known as money creation, as it expands the money supply.
- phkahler 4y agoIf that were true, bank runs could not happen.
- karpierz 4y ago> if a bank loans out the money that you deposited, both the borrower and you can spend it. When you "spend" money that you deposited with the bank, what you're actually doing is getting the money you lent to the bank paid off. What's the difference between that and you lending money to someone to buy a bagel/T-bond, and then at some point in the future, getting money back so that you can buy a sandwich/car?