
No, banks do not have a magic wand that creates money out of thin air - baobabKoodaa
https://www.attejuvonen.fi/money-out-of-thin-air/
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QuantumAphid
I found this article to be unnecessarily complex. Can banks and lending
institutions create money out of thin air? Contrary to the title of this
article, in the US the answer is yes. Money is created by the "stroke of a
pen" on the ledgers of accredited/regulated banks in the US banking system. In
fact, that's primarily where "money" is created, and not on printing presses
at Federal mint buildings.

~~~
baobabKoodaa
This is incorrect. The title of the article does not contradict this
statement. The title does not claim that money is not created, it states that
banks need no magic powers to create money. Can you see the difference? If you
actually read the article, you will find that it agrees with your statement.

------
salawat
This article insinuates that money is not created out of thin air under the
assumption that the thing being created is an IOU and therefore not money.

Duck typing, however, begs to differ, and the "fractional" part of "fractional
reserve" is in practice quite small compared to the value that banks keep up
in the air. The entire system as well runs on the basis of Statistical
multiplexing.

Assume for a moment $100 dollars was printed. Ever. 100 people want a loan of
1 dollar, and various banks deem these people trustworthy enough to go ahead
with it. Everyone else in the world has deposited %'s of a cent, which are
Federally Insured. Meaning that regardless of bank runs, the taxpayer of the
United States takes on an onus to make sure any FDIC insured institution's
deposits are covered and returned in the event of a bank folding. However,
let's say our banks all had all 100 of their granted $1 loans withdrawn, Just
before everyone else decided they wanted their money back. $200 worth of real
monetary payout obligation just popped up out of nowhere, and there's only
$100 of cold hard cash in existence.

Ruh ro, Raggy.

This is the Fairy Dust. If you hold the banking system upside down, and drain
it of ALL the combined value of all deposits, then line that up with what
everyone _should_ have, somebody is going home disappointed. Finance in
general works though, because by and large, people don't want to deal with the
hassle of looking after all that cash. All the accounting, and remembering
safe combinations, the risk of presenting too tempting a target for N'er-do-
wells, and the constant being pestered by friends and family for money! Ack!
No one has time for that!

So they delegate it to banks. Banks then amongst themselves tend to be able to
service everyone's immediate needs, statistically speaking, up to a point.
What happens at that point is where the controversy exists because even
"blessed" banks capable of printing money will find that their money they just
spent so much time printing is only good in as much as people are willing to
have faith in it that it is worth something and will be honored by everyone
around them tomorrow. This is the Fairy Dust. The Long Con. The great lie, the
Circular Reasoning at the core of Finance.

"Here, have some money. I made it today. You can probably do X with it."

"What about tomorrow? Or if you make more money? Or if you do something
stupid?"

"Stop asking questions like that and go buy some bread."

Arguing that it isn't the commercial bank "creating" money when the money
creation process is essentially managed via an indirection mechanism is a bit
disingenuous, and just reiterating how the money creation process is still
essentially arbitrary, and performed via indirection doesn't do anything to
remedy

A) A growing crisis of faith with the entire edifice's seeming inability to
favorably create positive results across the board.

B) the fact people see a spigot and tend to grab on to the easiest solution in
their minds of just turning it on and adding more without realizing that the
thing coming out of the spigot doesn't really matter, what really matters is
the _trust_ between people to make good on their promises which is what Fiat
currency is meant to be a symbolic representation of in the first place.

C) The very real challenge that it may just be that there is a fyndamentally
structural problem with transaction activity overall that results in
accumulation of capital in a handful of places due to misalignment of
priorities with regard to keeping money changing hands.

Label Start No trust->no room for doing good business. No good
business->nothing gets done, or gets done so poorly that the outputs cannot be
sustained without a disproportionate investment of input. Nothing gets done
well->people get pissy, and lose trust. Goto Start.

Finance is faith. Mammon writ large. If we try to underpin society on finance
alone instead of a commitment that the outcome of us (as a society) being
alive should be the creation of a better world for us all having been here,
the entire house of cards falls apart.

~~~
baobabKoodaa
> This article insinuates that money is not created out of thin air under the
> assumption that the thing being created is an IOU and therefore not money.

This is patently false. If you actually read the article, it says very clearly
(multiple times) that the IOUs created by banks are money.

