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The vast majority of money is not withdrawn. It's all transfers. And that is a major point and difference. Also, if it was all withdrawn it's a bank run, which

The vast majority of money is not withdrawn. It's all transfers. And that is a major point and difference. Also, if it was all withdrawn it's a bank run, which has not been a problem in the US for quite a while. Overall it cancels out for the large banks, of course people transfer money they just borrowed from the bank away, but that bank also has customers that are recipients of money. That, and other mechanisms between banks and banks and central bank(s) to balance such things within all the banks in the overall economy. Money withdrawn from one bank goes to another one, and everybody is not just sender but also recipient from someone else.

HDThoreaun 4y ago
I am responding to a post that said > Bank lending always creates new money. They don’t (and can’t) “lend deposits”. It's just not true. The banks do transfer literal cash from deposits out of the system through loans. The cash in banks didn't come from thin air.
- dools 4y ago
  Well, even reserve balances are created out of thin air… it’s all just accounting
- nosianu 4y ago
  > The cash in banks Why do you keep insisting on the "cash"? The by far least important kind of money? First of all everything is just virtual, electronic. Only a tiny fraction - and only temporary! It's not stocked at home, but used to buy something and that means deposited again in another bank - is "cash". And yes, the bank deposits are "out of thin air" -- https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... Yes banks need some reserves, but this is waayyyy more complicated than them using the deposits. Which, for the most part, are not cash. That's only that tiny fraction of paper money use din circulation, which also is a lot less than it used to be with all the card-money. https://www.bankofengland.co.uk/explainers/what-is-money https://www.bankofengland.co.uk/explainers/what-is-money In the UK, as an example: > 96% is electronic > 4% is cash USD is different because that currency is used for far more than just regular circulation, and world-wide. But even then estimates are ca. 8% cash maximum, for the world, which includes a lot less sophisticated economies. A bit more for the USD for obvious reasons, but most of that is not circulating in the US economy. In any case, even in the US, with all its cards and card payments, money is mostly electronic and not cash and is transferred from bank to bank and hardly leaves the banking system. ABOUT THAT TERM "OUT OF THIN AIR" I've seen articles arguing money is not create out of thin air, e.g. https://cepr.org/voxeu/columns/banks-do-not-create-money-out-thin-air https://cepr.org/voxeu/columns/banks-do-not-create-money-out... > commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise Uhm.. yes, exactly. They can't do it at will, they need a borrower to sign. I mean, now we start arguing definitions, always a bad sign, especially when both sides actually are in perfect agreement and it's about the words used. This article to me is just weird, arguing it's not out of thin air, while everything being described says just that, only that their understanding of "out of thin air" is subjectively different than that of many other people. But there is no difference in knowledge and opinion about the underlying mechanism, only disagreement about some fuzzy term that some like to use and some apparently hate for whatever reason. For arguments about definitions I would like to point to "Disputing Definitions" (6 min read) https://www.lesswrong.com/posts/7X2j8HAkWdmMoS8PE/disputing-definitions https://www.lesswrong.com/posts/7X2j8HAkWdmMoS8PE/disputing-...
  - HDThoreaun 4y ago
    I’m not reading that, but I’m using “cash” because that’s what I’m talking about. Yes most of the loan money isn’t cash, but the cash has to be available for withdrawal so “it’s just numbers on a screen” doesn’t actually work all the way down.
    - wonnage 4y ago
      Refusing to read about the thing you don't understand is pretty silly

HDThoreaun 4y ago

I am responding to a post that said > Bank lending always creates new money. They don’t (and can’t) “lend deposits”. It's just not true. The banks do transfer literal cash from deposits out of the system through loans. The cash in banks didn't come from thin air.

dools 4y ago
Well, even reserve balances are created out of thin air… it’s all just accounting
nosianu 4y ago
> The cash in banks Why do you keep insisting on the "cash"? The by far least important kind of money? First of all everything is just virtual, electronic. Only a tiny fraction - and only temporary! It's not stocked at home, but used to buy something and that means deposited again in another bank - is "cash". And yes, the bank deposits are "out of thin air" -- https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... Yes banks need some reserves, but this is waayyyy more complicated than them using the deposits. Which, for the most part, are not cash. That's only that tiny fraction of paper money use din circulation, which also is a lot less than it used to be with all the card-money. https://www.bankofengland.co.uk/explainers/what-is-money https://www.bankofengland.co.uk/explainers/what-is-money In the UK, as an example: > 96% is electronic > 4% is cash USD is different because that currency is used for far more than just regular circulation, and world-wide. But even then estimates are ca. 8% cash maximum, for the world, which includes a lot less sophisticated economies. A bit more for the USD for obvious reasons, but most of that is not circulating in the US economy. In any case, even in the US, with all its cards and card payments, money is mostly electronic and not cash and is transferred from bank to bank and hardly leaves the banking system. ABOUT THAT TERM "OUT OF THIN AIR" I've seen articles arguing money is not create out of thin air, e.g. https://cepr.org/voxeu/columns/banks-do-not-create-money-out-thin-air https://cepr.org/voxeu/columns/banks-do-not-create-money-out... > commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise Uhm.. yes, exactly. They can't do it at will, they need a borrower to sign. I mean, now we start arguing definitions, always a bad sign, especially when both sides actually are in perfect agreement and it's about the words used. This article to me is just weird, arguing it's not out of thin air, while everything being described says just that, only that their understanding of "out of thin air" is subjectively different than that of many other people. But there is no difference in knowledge and opinion about the underlying mechanism, only disagreement about some fuzzy term that some like to use and some apparently hate for whatever reason. For arguments about definitions I would like to point to "Disputing Definitions" (6 min read) https://www.lesswrong.com/posts/7X2j8HAkWdmMoS8PE/disputing-definitions https://www.lesswrong.com/posts/7X2j8HAkWdmMoS8PE/disputing-...
- HDThoreaun 4y ago
  I’m not reading that, but I’m using “cash” because that’s what I’m talking about. Yes most of the loan money isn’t cash, but the cash has to be available for withdrawal so “it’s just numbers on a screen” doesn’t actually work all the way down.
  - wonnage 4y ago
    Refusing to read about the thing you don't understand is pretty silly