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.
As for it existing digitally, that is just plain wrong. Or are you suggesting the borrowers digitally register that they now have £100 but the bank doesn't digitally register that it has £100 less? Or that the bank registers digitally that the borrower owes them £100 but the borrower doesn't digitally register that they owe £100?
Money created by Governments is unlike any transaction a bank makes because, simply, it has no counterpoint. Banks borrow, they have more money but owe more. Banks lend, they have less money but are owed more. Government creates money, or doesn't, and there's no such counterpoint. It's a very powerful tool.
.gif)
