this post was submitted on 23 Dec 2023
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Rent is Robbery (lemmy.ml)
submitted 10 months ago by [email protected] to c/[email protected]
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[–] [email protected] 1 points 10 months ago (1 children)

https://economics.stackexchange.com/questions/26991/is-money-mostly-created-out-of-nothing-by-banks-making-loans

[–] [email protected] 2 points 10 months ago (2 children)

I think the answers to the question are generally isaying it isn't as simple as 'creatijg money out of nothing'. They may be creating money but that money is backed against assets which they do own.

because banks are government regulated and insured institutions, forced to back each loan with reserves, and regulated to have capital for each of those loans, they cannot really be said to make this private money out of nothing.

[–] [email protected] 1 points 10 months ago

The context you left out there said right before that "in my opinion". In any case though, before it was "backed" by a fraction of the loan. That doesn't mean it wasn't new money that did not yet exist. It just means if the bank folded there was something to go toward repaying those whom they owed. But in any case that fraction was reduced to zero in the US under trump. Something I learned in this thread. So really, now that backing doesn't exist any longer.

[–] [email protected] 0 points 10 months ago

How is money created? Some is created by the state, but usually in a financial emergency. For instance, the crash gave rise to quantitative easing – money pumped directly into the economy by the government. The vast majority of money (97%) comes into being when a commercial bank extends a loan.

https://www.forbes.com/sites/francescoppola/2017/10/31/how-bank-lending-really-creates-money-and-why-the-magic-money-tree-is-not-cost-free/?sh=18b9b3073073