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> If money is created as debt, how do you explain bankruptcies? Banks typically loan money they don't have on hand (see fractional-reserve banking). And when t
by stray 3y ago
> If money is created as debt, how do you explain bankruptcies?
Banks typically loan money they don't have on hand (see fractional-reserve banking). And when they do that -- money is created out of thin air. Bankruptcies have nothing to do with it.
- wiredfool 3y agoNot really. Retail banks need to have the money on hand to lend. That can come out of deposits (leaving a portion in reserve for liquidity, should the deposits need to be redeemed. (hence, fractional-reserve)) or other capital. There's a ledger that has to balance. A Central Bank (at least one that is in control of its currency) can lend money and have it essentially come from thin air.
- danesparza 3y agoIf money is created out of thin air, then why do we need bankruptcies? The money has been created -- why do we worry about paying it back?