Quote from: deisik on July 26, 2019, 06:54:55 AM

Quote from: Kakmakr on July 26, 2019, 06:22:23 AM

Quote from: deisik on July 24, 2019, 07:35:23 PM

Quote from: SuperPandaBear on July 24, 2019, 06:52:56 PM

It's called fractional reserve and has been happening for years since we ever departed from a gold standard. Welcome to the post Nixon era

Fractional reserve is also a thing of the past

It is a very common and widespread misconception to think that banks are somehow limited by the deposits that they have received (what fractional reserve is essentially about). In the modern day money is created via credit (it is called credit money for a reason). Banks don't need to look back at how much they have in their vaults as they can create as much money as required to meet the demand for that money. And if you think of it, it actually makes perfect sense since this is a very effective mechanism to provide liquidity for the economy in case the latter needs it. In other words, there is no reason to limit credit via a metric which doesn't in the least reflect the actual demand for new money

Agreed, but what difference is there between creating money from thin air by using Fractional reserve practices or by doing this by creating "fake" money via credit? Adding some numbers on an internal ledger to give more credit are exactly the same as adding additional money by lending money that you did not receive via deposits

It is a difference that makes the difference (and vice versa)

You seem to be looking at it from the wrong angle as you implicitly assume that credit money is inherently wrong or even evil. The money created via credit is not "thin" money, so to speak. It is still a collaterized form of money, i.e. money backed up by tangible assets (think of it as an extended and expanded variety of the gold standard). But with "classical" FRB you are limited by the deposits, while with purely credit money you are only limited by the demand for credit. So the second form of credit money is better for the economy because money gets created (and destroyed, for that matter) according to the needs of that economy. Simply put, it is a better device and more robust mechanism for providing liquidity to economic agents, i.e. those who need this money (businesses and individuals)

You will never convince me that credit is "good" money creation. If people were able to pay the debt, it would have been acceptable, because it stimulates the economy, but most people default on their debt, because they should not have qualified for that debt or their circumstances change and then they cannot pay that debt anymore.

The ridiculous interest on that debt also generate "new" money, which is also bad. The Bitcoin supply is fixed, so you cannot create tokens out of thin air. Wink