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> When you ask the bank for the money to buy a one-bedroom box in London, the money that appears in your account isn't borrowed from some prudent grandmother's
by nodata 13y ago
> When you ask the bank for the money to buy a one-bedroom box in London, the money that appears in your account isn't borrowed from some prudent grandmother's life savings. In fact, the bank simply types those numbers into your account, creating brand new money that you can now spend.
Erm what?
- seanhandley 13y agoYes. Banks bring money into existence in the form of debt by loaning it to people. It seems massively immoral to me that they charge interest on something that literally costs them nothing to bring into existence.
- nodata 13y agoIs there a limit on how much money they can create? Can I start my own bank?
- kls 13y ago1) Yes there is, that is why it is called fractional reserve, they are allowed to expand the money supply based on a fraction of the reserve deposits they take in. This number is set by the FED in the case of the US. 2) Yes you can with the proper licensing and certifications. It's not as easy as hoping on down to the division of banking and picking up your license, there are some pretty stringent requirements, it's not cheap to start a bank.
- bocajuniors 13y agoIn Europe the limit doesn't exist anymore. So the term FRB is somewhat misleading. I suspect the same holds for the USA.