LogFAQs > #883521206

Medussa posted...

let me put my thoughts a different way and see if we're talking about the same thing.

person S opens a savings account at bank B. S deposits $1000, B promises an interest rate of 1%
B takes $100 of that money and puts it into the guaranteed money safe, and $900 of that money and puts it in the lendable money safe.
person L comes into the bank, and asks to borrow $500. B agrees, with a 5% interest rate.

so, B makes $25 from L, and S makes $10 from B.

but none of that money was created by the bank. they just facilitated and secured the loan between S and L.

The money has an originating cash source from the federal reserve. But banks can and do take the same cash deposits and loan them out to become re-deposited multiple times.

The bank doesn't literally create money, but it doesn't have the money it gives you, either.

If everyone went to every bank and everyone all tried to withdraw all of their money at once, every bank would go under because the money the banks say you have doesn't exist.

This happened in the 1920s and it caused the Great Depression, and FDIC was created as a result, but that only protects your accounts for up to $100,000.

So, sure, they're not creating money, they're taking the imaginary money that doesn't exist and increasing it arbitrarily.
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