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You wouldn't have been able to create Loddars if you said "Well the value of an IOU from the apple farmer has been established at this point so you can't just c
by mmaunder 14y ago
You wouldn't have been able to create Loddars if you said "Well the value of an IOU from the apple farmer has been established at this point so you can't just create a Loddar". But Loddars were created because money is an IOU for anything. And so you can create new money by creating a new IOU even though Loddars exist.
- TeMPOraL 14y agoI keep wondering: When you create this new IOU you basically start to repeat the process that resulted in Loddars in the first place; you could theoretically repeat it with the new IOU. Isn't it getting recursive? :).
- rajivm 14y agoYes, and in fact this happens many times over: Greg gets a loan from the Bank for $5000. Greg gives Stacey the $5000 to buy her car. Stacey deposits the $5000 in the bank. Bob gets a loan from the Bank for $4500. Bob deposits this $4500 in his bank account to spend. Mark gets a loan from the Bank for $4000. And it goes on. In the United States: Of less than $11.5 million have no minimum reserve requirement; Between $11.5 million and $71.0 million must have a liquidity ratio of 3%; Exceeding $71.0 million must have a liquidity ratio of 10%. That means mosts Banks only have to retain 10% of their money as cash and can continue to recursively loan out the rest of it.
- jamesaguilar 14y agoRight. Also, in the real economy this note IS a dollar. This is because of fractional reserve banking.