Quote from: o_e_l_e_o on July 27, 2019, 03:09:27 PM

Quote from: deisik on July 27, 2019, 12:20:15 PM

In this way, if the bank refuses the loan to someone without a credit history, it doesn't run the risk of a future default but it (or some other bank in the system) has already incurred some losses from the past default of this borrower.

With every loan there is still a risk of default, even with previously trustworthy people with good credit histories

Basically, it is a one-off event. For a borrower. And technically, for a bank too, with that client. But with a world living on debt and in debt, this event would be pretty inconsequential

Quote from: o_e_l_e_o on July 27, 2019, 03:09:27 PM

Quote from: deisik on July 27, 2019, 12:20:15 PM

As you can see, it involves a little more than just a promise of a random dude from the street. In short, empty promises don't work. You need something else, more solid

I'm not following. What is "solid"?

Maybe, solid as in reputation? It is hard to build and easy to destroy. Once it is ruined, there's typically no way back (as even this forum clearly shows and knows)

Quote from: o_e_l_e_o on July 27, 2019, 03:09:27 PM

Quote from: deisik on July 27, 2019, 12:20:15 PM

The money in the bank "depository" is the reserves which are used to back up a loan

Yes, but the bank's reserves come from other people's deposits. A bank can't give this money out in loans and keep it in their reserves. At some point, new money has to enter the system, and banks do this by creating credit out of nothing

Okay, so you agree that presumably uncollateralized loans (like credit cards with a nice credit limit) may actually come from deposits, and in this manner you can't say that money for these loans appears out of nowhere. That seems to be a pretty solid conclusion (no pun intended)