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Banks don't create money. When you deposit money, they give you the promise that you can have it back, but you are no longer owner of the money. Similarly, when
by wlievens 18y ago
Banks don't create money. When you deposit money, they give you the promise that you can have it back, but you are no longer owner of the money. Similarly, when you borrow money, they let you have some of their money (when you withdraw) on promise that you pay it back, with interest.
Banks don't create money. Government institutions do.
- cchooper 18y agoA current account is a bit like a short-term bond. It is a valuable commodity that is created by banks and can be traded in the market. The difference is that bank trading systems allow current account balances to be used directly as payment, without having to be converted into cash first. Therefore the current accounts themselves are being used as payment, and count as money in their own right. This is why current account balances are counted in all the official measures of money quantities, including the most strict measures such as M0.
- natrius 18y agoAccount balances are not a part of M0. M0 is all of the bills and coins in existence. Your bank does not have all of the bills to back all of its customers account balances. Account balances are part of M1.
- deleted 18y ago[deleted]
- likpok 18y agoThere is a subtle but important difference between money and currency. Only government creates currency, which is-a money. However, both banks and government can create money in other ways, such as through the fractional reserve system or through buying/selling securities (government only).