Quote from: tee-rex on July 30, 2014, 05:59:20 PM

Quote from: twiifm on July 30, 2014, 05:20:37 PM

Quote from: tee-rex on July 30, 2014, 03:54:59 PM

Quote from: twiifm on July 30, 2014, 03:39:46 PM

Quote from: tee-rex on July 30, 2014, 03:23:44 PM

Quote from: twiifm on July 30, 2014, 01:08:52 PM

Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new? I said my view of money comes from MMT. As opposed to neoclassical, Austrian, or other.

I'm not missing your point. You just have a neoclassical view of money and you are glossing over the shadow bank industry. You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system. Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations. But instead of going back in time let's say we just replace the modern system w gold standard. BMWFS can still keep financing loans using their cars as assets. When you finance a car from BMW they create a loan. When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion. They can also create asset backed securities on these and use these as liquid money. You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC. This was what was happening. People like Yellen is aware of this. The issue is how to regulate this shadow bank money. Nobody knows how to deal with it

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins. But they can still create credit money