this post was submitted on 23 Dec 2023
1062 points (91.8% liked)
Memes
45887 readers
1508 users here now
Rules:
- Be civil and nice.
- Try not to excessively repost, as a rule of thumb, wait at least 2 months to do it if you have to.
founded 5 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
https://economics.stackexchange.com/questions/26991/is-money-mostly-created-out-of-nothing-by-banks-making-loans
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.
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.
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