#9215173, By Jazzassin This is starting to get a little scary

  • Jazzassin 10 Dec 2012 10:41:46 75 posts
    Seen 10 months ago
    Registered 2 years ago
    LeoliansBro wrote:
    Jazzassin wrote:
    LeoliansBro wrote:
    Either I don't understand banking and money or that article doesn't. Banks don't create money out of thin air.

    But they do create money out of thin air, that's the entire point of the cash-to-loan ratio.

    If a bank has 100 million worth of deposits, and they hold onto 10 mil of that, and lend out the remaining 90 mil, they've created 90 mil of new money because both the depositors and the borrowers will think they have 90 mil worth of money and will behave accordingly. And the new money's not just in their minds, it does "exist" digitally.

    That's just as real as new money created by governments. No one actually goes and prints out new bills these days, except to replace worn out ones,
    Cute. But no.

    Why label banks in this way, why not cut out the middle man, so to speak? Say I lend you 100. According to you I've just created that money out of thin air, because you think you have 100 and so do I.

    Of course this isn't the case - the fact is you don't think you have 100 at all, you think you owe 100, and will behave accordingly.

    Call it cute or whatever you want, but you still don't get it.

    If I borrow money from you, I'll have the money and you won't. You won't be able to use your money without getting it back from me first.

    Banks don't work like that. If you deposit money in a bank and they lend it to someone else, you can still go withdraw your deposit and use it at any time.

    Edited by Jazzassin at 10:46:07 10-12-2012
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