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> downandout is wrong. Did I say that it didn't apply to p2p loans? It, of course, applies to any money that can be a new deposit. And how exactly am I wrong?
by downandout 12y ago
> downandout is wrong.
Did I say that it didn't apply to p2p loans? It, of course, applies to any money that can be a new deposit. And how exactly am I wrong? The concept of the money multiplier is pretty well documented. There's even a chart that I linked to.
- userbmf 12y agoI don't think it does apply to p2p loans. When I save $100 with a bank I retain my demand deposit - that $100 is still "there" for me. That is the multiplier effect (though that model has other flaws). When I borrow $100 from p2p lending then loan it out to you through p2p lending I no longer have that $100 until you repay it to me, at which point you no longer have it. So we are simply passing $100 around without any multiplier effect. edit - can't reply to you as the reply limit bottomed out - your response doesn't have enough info. You didn't address the demand deposit vs timed loan difference.
- jackgavigan 12y agoI owe you the $100 in the same way that the bank owes you the $100 you deposited. The only difference is that the bank is regulated and (FDIC) insured.
- downandout 12y agoIt applies to P2P loans in the macro sense. The proceeds from the p2p loan will be deposited in a bank somewhere, and then X% of that deposit can be lent out by the bank, and the cycle continues.