Banks Creating Money
Debate on whether commercial banks create money out of thin air through lending and loans, challenging myths about fractional reserve banking and citing Bank of England explanations.
Activity Over Time
Top Contributors
Keywords
Sample Comments
The power of money creation is in the hands of private institutions more explicitly than that. When a bank lends you money, they are just incrementing the money counter in your bank account. They cannot print bills, but they do for all practical intents create money.https://www.bankofengland.co.uk/explainers/how-is-money-crea...
Most money isn't from printing presses. Banks create money by handing out loans.
This is a common misunderstanding of banking. They don't invent money.The money supply "increases" when banks lend because of the double entry accounting system. They give you a loan, you can deposit the money in a bank account, and they have more deposits to loan out. It's literally just lending the same dollar twice, not inventing or creating money. (Well... somewhat less than $2 because of reserve requirements).That's not inventing money.
Banks don't literally print money but they do create it when they issue loans.
No the money is simply created an enters the "economy".http://bankunderground.co.uk/2015/06/30/banks-are-not-interm...
That link is rather disturbing. They clearly state that money is created when a bank "makes a loan" and simultaneously creates a deposit in your account. In other words, they enter an amount in your account and simultaneously an IOU to themselves to redeem later.
That's not how banks work: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Yup, thin air. When people borrow money, the bank just creates the money out of nowhere. That money doesn't actually exist until the debt is paid. Banks are ultimately responsible for the extreme inflation of virtually all currencies currently in use.
Money is loaned into existence by private banks. See my parent comment in this thread.
The bank isn't creating that money. When you deposit $1000 in a bank account, you lose that $1000 and gain 1000 FunnyMonies instead. The bank can then turn around and give that $1000 to someone else. At the end of the day, there's only $1000 running around.What makes it look different is that we treat 1000 FunnyMonies as if it were $1000. So instead of saying "there's $1000 and 1000 FunnyMonies" we say "there's $2000, oh look, the bank created money." B