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"...precisely the distortion that needs to be clawed in again, where the fact that one can borrow to pay for something means that the price can be higher than market value by the factor of whatever the fractional reserve is now..." smiled the goblin, adding "...whereas if no one would forward the debt, then the market, not the lenders, would actually determine the price of things, btw when they advance a loan to you they forward debt as you say but they actually pay off the seller too, but that money invariably ends up in another bank thus allowing yet more borrowing again, so yes they're created money as long as they keep to the law by retaining a fraction of that money in reserve, factional reserve is just this then, your being able to lend to peter what he owes to pall who then returns the amount to you only for you to be able to lend back to another peter now, while the original peter is paying you back still, where if the factional reserve is 15 to 1, then that's 14peters that one can lend the amount too...", in fact, the goblin agreed that there was no pot of gold sitting in the banks, , instead there was only this fraction of what they had lent out, so he couldn't agree more in fact feeling that even that fraction was not there neither, that they were all over extended with toxic debt at this point, adding "...after all, if they know the government will bail them out with taxdollars, is there any real reason not to go off on a loaning spree the first chance they get, something which they will then bundle those loans together into bonds as they did before that they will then float on the stock market again, resulting in a sea of toxic liquidity..."Money includes more than currency. Eggs are money if you exchange them for goods or services or the repayment of debt. Also, banks don't lend money. They advance debt. When you take out a loan, they don't give you any money. You ask for X dollars worth of credit. They assess your worthiness, and say yes or no. What they give you is not money. It's a merely transferring your non-spendable IOU into a spendable IOU. No money is transferred. It's the promise that you will pay it over time, with interest. You take that promise to where you want to buy from, in the form of CURRENCY or a CHECK balanced against your promise to pay it in the future. There's no pot of gold sitting at the bank, those dollars you "borrow" are actually your dollars which you haven't earned yet.

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