this post was submitted on 24 Jun 2024
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[โ€“] [email protected] 9 points 4 months ago (1 children)

Fractional-reserve banking

That has already become outdated, at least according to some economists.
Banks can just create loans out of thin air without having to check their own reserves first.
https://en.wikipedia.org/wiki/Money_creation#Credit_theory_of_money

[โ€“] [email protected] 7 points 4 months ago

So if I understand correctly, the reason it's outdated is not because we don't need those pesky banking regulations any more, but that it has been found that banks will just take out their own loans to cover the reserves they need from the central bank, so they can just lend as much as they want, no seatbelts. And the central bank will never run out of loans to give, since they have insane reserves, in their own currency it is technically unlimited.

So money is not really the thing we think it is. If banks overextend themselves and fuck up, the only thing we'll see instead of failing banks is runaway inflation in the consumer and asset (housing) markets. Wonder where I've seen that.