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Let's say I have 1 million. I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates in
by mgaunard 3y ago
Let's say I have 1 million.
I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates income.
Or I can lend it to someone. But then I can't do my beer business and am losing that potential income source.
If I don't get anything back from my lending, then clearly I'm losing out.
You seem to be thinking that the fact there is a bank involved somehow changes things. It doesn't, a bank is just another private entity, albeit operating within a regulated framework. It doesn't make money out of thin air. Money it gives to you for your house is money that cannot be invested in other opportunities.
- hgomersall 3y agoCreating money out of thin air is exactly what a bank does. It's basically the definition of a bank: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
- mgaunard 3y agoA national/central/reserve bank is very different from a normal bank. To such a bank, national tender is actually pretty much a bond, and therefore they can issue more of it. No such bank sells mortgage products to retail customers.
- hgomersall 3y agoThe first sentence of that document makes reference to money creation happening by commercial banks making loans. It then goes on to explain much of the detail. The document is all about commercial banking. Central banks operate exactly the same way as commercial banks, just the money they create flows in a different circuit.