[Armageddon]

When banks receive deposits they can lend 10 times the amount of that money, that is called fractional banking . Example, If you deposit 100 dollars, they can lend 10 times that amount which is 1000 dollars. They basically create than money out of thin air. So when these loans are made, this fictitious money goes toward the US gdp. Therefore, our gdp is over inflated because of this fictitious money. Doesnt make any sense. We are a society created by debt, which is unsustainable in the real world.

[Kingcoal]

There are a million posts on this subject already.

[Armageddon]

oops, sorry. my bad

[Peak_Plus]

$this->bbcode_second_pass_quote('Kingcoal', 'T')here are a million posts on this subject already.

[Peak_Plus]

Besides, it doesn't work that way.
A bank can only lend money that passes through its hands.
If 10% is in its books, it borrows 90% from another bank (or wherever) in order to lend out 100%. Only the government can "make" money like you are proposing.

[Armageddon]

$this->bbcode_second_pass_quote('Peak_Plus', 'B')esides, it doesn't work that way.
A bank can only lend money that passes through its hands.
If 10% is in its books, it borrows 90% from another bank (or wherever) in order to lend out 100%. Only the government can "make" money like you are proposing.

[Peak_Plus]

???

In order to give someone money (yes, you can borrow money and let the bank pay you in cash, for instance) you have to have it first. Or what do you pay the person who just sold you the house that you borrowed 200 grand on? Most sellers would prefer real money instead of a promise of 90% fake money, don't you think?

[nero]

$this->bbcode_second_pass_quote('', 't')hats not true. They lend that 90 % which doesnt exist. They are the ones that create money out of thin air. Governments only print money.

[Armageddon]

thats why its called fractional banking. take in 10 %. lend out 90 %. I heard a top economist explain this whole thing. Most people dont realize this.

[deconstructionist]

$this->bbcode_second_pass_quote('armegeddon', 'W')hen banks receive deposits they can lend 10 times the amount of that money, that is called fractional banking . Example, If you deposit 100 dollars, they can lend 10 times that amount which is 1000 dollars. They basically create than money out of thin air. So when these loans are made, this fictitious money goes toward the US gdp. Therefore, our gdp is over inflated because of this fictitious money. Doesnt make any sense. We are a society created by debt, which is unsustainable in the real world.

[deconstructionist]

$this->bbcode_second_pass_quote('Peak_Plus', 'B')esides, it doesn't work that way.
A bank can only lend money that passes through its hands.
If 10% is in its books, it borrows 90% from another bank (or wherever) in order to lend out 100%. Only the government can "make" money like you are proposing.

[Armageddon]

what is funny is that banks use your money for loans, but have you ever seen your account debited for these loans ? That shows you that this money they use is money that was created from nothing, because your money is still in your account.

[Peak_Plus]

$this->bbcode_second_pass_quote('armegeddon', 'w')hat is funny is that banks use your money for loans, but have you ever seen your account debited for these loans ? That shows you that this money they use is money that was created from nothing, because your money is still in your account.

[emailking]

$this->bbcode_second_pass_quote('nero', '
')
If the bank could lend more than is deposited then the bank could in practice make an infinite amount of loans since it could at will expand it's capacity by simply making a loan to itself and depositing the money in the bank. If banks were able to get away with this, money would lose all value as there would be in practice an infinite amount of money available.

[CrudeAwakening]

emailking is correct. The end result is that a $10 deposit becomes $100 of deposits via the loan and re-deposit process, but the bank can't just loan out $90 from a $10 deposit.

There is a semantic issue over whether the banks create "money" or "credit". I guess it's more correct to say they create "money substitutes" or "credit-money"; however, the distinction is somewhat moot as all deposits are treated equally regardless of whether they originated as payment from someone who borrowed the money. If the initial deposit was "money", then so are the deposits created from the loan process. They can all be used as final payment for goods and services, provided we ignore the inherent illiquidity of the banking system and only a small proportion of people demand cash.

[Peak_Plus]

$this->bbcode_second_pass_quote('CrudeAwakening', 'T')he end result is that a $10 deposit becomes $100 of deposits via the loan and re-deposit.

[Doly]

$this->bbcode_second_pass_quote('Peak_Plus', '
')As you see, it's not possible to "create" money at all (even in a semantical sort of way) in this manner.

[Peak_Plus]

Morning Doly!
Deconstructionist had a very good description:
"The treasury creates a bond, and "sells" it to the Federal Reserve, who then writes a check to the government, who spends this newly created money," creating a greater money supply. That's why the government is always more and more in debt to itself.

Inflation (in the layman's definition, i.e. rising prices) is created when the money supply grows faster than money demand, which grows wenn the economy is growing.

Like I said before, you can also increase money supply by digging up more gold, for instance, but the federal reserve does it more cheaply...

[CrudeAwakening]

$this->bbcode_second_pass_quote('Peak_Plus', '')$this->bbcode_second_pass_quote('CrudeAwakening', 'T')he end result is that a $10 deposit becomes $100 of deposits via the loan and re-deposit.

[Peak_Plus]

$this->bbcode_second_pass_quote('CrudeAwakening', '
')If money is spent on goods...