Sunday, June 24, 2018


Banks create money out of thin air. The vast majority of money doesn't exist in hard currency, including paper (if paper can be classed as 'hard').

Loans for cars, etc? Created out of thin air.

Mortgage for a house? Created out of thin air.

But this also applies to loans for business and commerce.

Banks lend to business and commerce and expect to get it back. But if the business fails, what happens to the money created out of thin air for that business? Simple: written off.

Some businesses work. Some don't. The businesses that work repay the loan. Banks can lend whenever they want knowing/expecting some businesses will fail, but that's OK because the money didn't exist in the first place. Sure, the more businesse survive the better for the banks who get back their money created out of thin air...and with interest.

But if the money was not created out of thin air, if the banks had to lend out hard currency for business as well as for mortgages, etc, then what? Would the banks have to be very, very careful who they lend to? If all their loans had to come from deposits in their vaults? Er, of course. But this would seriously put the brakes on the economy.

So who, if anyone, should have the power to create money out of thin air? Should it be the private banks who are only motivated by profit and greed with no sense of serving the nation? Or should this be the responsibility of a government-run bank or system of local government-run banks?

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