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> Every deposit originates from a loan How is the cash I deposit from the dividends I earned originate from a loan? How about the community banks that purchase
by mohamedattahri 3y ago
> Every deposit originates from a loan
How is the cash I deposit from the dividends I earned originate from a loan?
How about the community banks that purchase gold from their customers?
- hgomersall 3y ago_All_ deposited money is created from a loan. Trace it back through the system (assuming you can) and you get to a loan creating a deposit.
- RandomLensman 3y agoNo seigniorage at all in the system?
- hgomersall 3y agoEven central banks operate the same way. The result is what is called The National Debt (which is just the sum of money spent but not yet removed).
- mohamedattahri 3y agoThis is factually untrue and I just gave you two counter-examples. While it's true that credit has long replaced deposits for money creation, the idea that all deposits strictly originate from some virtual loan operation is fallacious. Consider that some banks are hundreds of years old and have commercial relationships that span well over a century, long pre-dating the modern financial system and the considerations we're discussing.
- aeonik 3y agoI was under the impression that every cent that is created by the Federal Reserve and the US Mint, is delivered to banks via a loan. Wouldn't that mean that the origin of all "money" under this system, either be a loan or fraud?
- hgomersall 3y agoThey weren't counter examples, they were just normal monetary transfers. Even early banks ran in the same way, with a double entry ledger. Every liability in the system is matched with a corresponding asset, that's just accounting.
- reso 3y agoObviously, not all transfers of money are loans, like your dividend payments, or normal transactional commerce. The statement is that when a bank creates a loan, it creates money. The money they give to the lendee is new money. This is the primary mechanism of money creation in our system.