then where DOES the currency come from?
Please don't say customer deposits at banks.
Other than that, I'm willing to have a dialogue about where people really think our currency originates.
We use a fractional Reserve system of banking.
why? because banks are required to carry a reserve of cash at all times.
so if I get a 100k loan from the bank and deposit it in another bank they can loan out 90k of it if the reserve is set to 10%.
if people C gets the 90k and deposits it then the bank can lend out 81k.
our banking system is pretty simple if you understand it.
That is only a legal requirement. It doesn't explain where money comes from. It is also a misleading way of describing the system we have, as reserves are not the safety net that you make them out to be. Reserves are there for settlement purposes.
Banks don't loan out hard currency I never said they did. you are not being honest again and making stuff up.What, exactly, are you depositing? And what, exactly, are those banks loaning out? Hard currency?
But you still can't tell me where new money comes from.
Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.We use a fractional Reserve system of banking.
why? because banks are required to carry a reserve of cash at all times.
so if I get a 100k loan from the bank and deposit it in another bank they can loan out 90k of it if the reserve is set to 10%.
if people C gets the 90k and deposits it then the bank can lend out 81k.
our banking system is pretty simple if you understand it.
why can you not actually discuss what I said? ol yes because you can't be honest in a discussion.
the fact is we use a fractional based money system. I never said anything about safety nets at all. so there is your strawman argument.
I said banks are required to carry a reserve of case at all times.
Banks don't loan out hard currency I never said they did. you are not being honest again and making stuff up.
although I guess if you got a loan from the bank and requested hard currency you could do that as well.
Do Banks Create Money from Thin Air? - New Economic PerspectivesNew Economic Perspectives
I think this sums it up nicely.
please see the reserve banking system it is in there. which is what we use.
Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.
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And what do you think they have this reserve of cash for? What is its purpose?
Right - banks don't loan out hard currency. So what does that leave? Credit. Bank-created money. But, but, but... you claimed that banks loaned out other people's savings. So, which is it?
No, Dan doesn't say anything about the reserve banking system in his paper. Did you even bother to read your own link?
Also - were you aware that New Economic Perspectives is an MMT website? And Dan Kervick is an MMTer? You said that his paper sums it up nicely, and I agree. Does that mean you are on board with MMT now?
nope because that paper has nothing to do with MMT. your dishonesty in a discussion just continues.
in fact he directly imply's that your argument of money out of thin air is wrong.
but you didn't read the paper so you don't know or you do what you always do
and only read some of it instead of all of it.
:lamo
No, I read (and understood) the whole paper. It's an MMT paper by an MMTer, and you were too foolish to understand that you were trying to use an MMT paper to undermine an MMT argument. But that's what happens when you just post the first Google result that comes up without checking it out.
We are less than 15 posts in to this thread, and you have already painted yourself into a corner.
I read these papers because 1) I'm interested in the subject, and 2) I have to, in order to check out your false claims of what they contain. This paper did not talk about the fractional reserve system, as you falsely claimed it did, just like the paper you cited in the other thread did not contain the false quote you attributed to it. So if anybody is debating dishonestly here, Ludin, it's you. You are making stuff up, then making the compounding mistake of attributing your made-up garbage to a real paper.
Wrong it is a paper by a person that doesn't discuss MMT at all but says that banks really don't create money out of thin air.
I guess you missed that but that does not surprise me.
Yes you have because so far none of your argument have anything to do with what I posted or the article that
said banks really don't create money out of thin air. not sure what you are going to do about it.
probably continue to be dishonest since you really don't have anything else.
Nope the paper was in direct contention to your claim that banks create money out of thin air. the paper disagree's. I tend to go with the paper.
so there is yet another dishonest argument from you.
The other fact is that we do run a fractional banking system.
"Where did the IOU come from? Was it created from thin air? More or less."
What am I going to do about it? I am going to continue making you look foolish with your own sources, that's what.
The point of the paper is that, despite what some people think, banks cannot just whip up a bunch of profits out of thin air. i.e., they are not "self-funding," like the U.S. government is. But banks do create loans out of thin air, and these loan proceeds constitute the vast majority of M1/M2. It is most of the money we all use in day-to-day transactions.
Yeah.... not so much.
as I said you only read what you want to read. there is more to the article but you don't post that because you are dishonest.
While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system.
No, banks are not self-funding, either individually or in the aggregate. The “out of thin air” language, while containing elements of truth, can be extremely misleading, and people using this language sometimes woefully under-represent the significance of central bank liabilities and the government in the US financial system.
The article specifically addresses people like you amazing how you didn't read that.
And these bank debts are not just so-called debts or pro forma debts. They are real debts which banks must and do routinely pay off in the course of doing everyday business; and the assets a bank uses to pay these debts come from sources external to the bank. A bank cannot simply manufacture its own payment assets from thin air.
People who are fond of saying the banks create money “from thin air” often seem to suggest that banks are no different than the government in that regard, and can thus obtain valuable monetary assets simply by manufacturing them ex nihilo, in effect profiting from pure seigniorage in the way a currency-issuing government can. But this picture is wildly inadequate.
But it is crucial to recognize that banks do not and cannot simply manufacture their own assets – whether from thin air or otherwise. What they manufacture are liabilities; that is, debts. And they obtain assets from external sources, mainly by trading debts for debts.
That is only a legal requirement. It doesn't explain where money comes from. It is also a misleading way of describing the system we have, as reserves are not the safety net that you make them out to be. Reserves are there for settlement purposes.
Reserves and cash are MB. Bank deposits are M1/M2.
Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.
Uh, no. MB is Federal Reserve cash and assets (bonds). M1/M2/M3 are commercial bank money (stuff we spend).
No, you have zero clue on what you are talking about.. Imapeg explained it very well.
The MB is the base money which is created by the FED when it buys assets. There is a reason why there is $16t in banks but only $3.8t in MB.
MB is cash and reserves, not bonds.
You said that imagep was on target when he said, ""Broad money" is simply the same MB circulating by the process of lending and the deposits of that lending, with no increase in MB. It's the same money being counted over and over again, without the offseting liabilities created by the lending being subtracted out." Then, in your very next sentence, you make a distinction between the $3.8 trillion in MB and the $16 trillion in broad money. Make up your mind.
Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.
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No, you have zero clue on what you are talking about.. Imapeg explained it very well.
The MB is the base money which is created by the FED when it buys assets. There is a reason why there is $16t in banks but only $3.8t in MB.
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