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There are many problems with your understanding, but the simplest total failure of your model is that if the bank did just get the money from somewhere else to
by Acumen321 4y ago
There are many problems with your understanding, but the simplest total failure of your model is that if the bank did just get the money from somewhere else to lend, it is not creating it.
You are not describing the bank "creating" money, which they actually do as per how I described. You are describing the bank borrowing money.
- bubbleRefuge 4y agoI disagree . And language can get tricky here. You don't need deposit amounts in order to make loans. There is a bunch of gymnastics under the hood of the transaction I described but none of it requires consumer deposits.
- Acumen321 4y agoYou start a bank, I come to take out a loan and I want it in cash since I am buying a used car this afternoon. You have no cash since you said you don't need it, are just going to create it. Where does the cash come from? If you get it somewhere else, like the FED, you clearly aren't creating it, the FED is, right? If you need to involve the FED (which you don't as per how I described) then the FED creates the money, not the banks. This invalidates your entire premise.
- bubbleRefuge 4y agoMoving the goal posts. Loans are contracts that create deposits. What you do with your deposit is a separate operation.
- bubbleRefuge 4y agoAdditionally, if you take my example above and change bank B to bank A which is completely feasible in the real world, then it is thin air.