4 ms·
> Along with a "-$100" IOU on the books Which they can use as an asset to create (lend out) even more money that they don't have. Call it what you want, but t
by thunky 10mo ago
> Along with a "-$100" IOU on the books
Which they can use as an asset to create (lend out) even more money that they don't have.
Call it what you want, but the bank is adding money to the economy that wasn't there before.
- anonymars 10mo agoThe bank is essentially converting a short term IOU (liquid deposits) into a longer term IOU (the loan) It's a function of time (mediated by interest rates, subject to market demand, namely liquidity preferences) That's not the same as outright "printing money" which is not backed by any deposits (what does the balance sheet look like when "printing money"?)
- thunky 10mo agoOk fine I'll agree call it "creating money" rather than "printing money", because it's not the same mechanism the central bank uses to "print" permanent money (technically not printed either but whatever), but money is still created by the bank.