McHenry wrote:Cactus Jack wrote:McHenry wrote:For the hard of thinking:
Money is more than banknotes and coins. If you have a bank account, you can use what’s in it to buy things, typically with a debit card. Because you can buy things with your bank account, we think of this as money even though it’s not cash.
Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account.
This also means as you pay off the loan, the electronic money your bank created is “deleted” – it no longer exists. You haven’t got richer or poorer. You might have less money in your bank account but your debts have gone down too. So essentially, banks create money, not wealth.
Except that isn't the whole story.
First your bank can only lend based on something called it's liquidity ratio. In essence it can only lend up to a certain amount and that's that. A liquidity ratio is governed by how much the bank holds in deposits and bonds and the availability of bonds is determined by the government. Most 'bonds' last for 90 days after which the government has a choice to reissue them - essentially paying them off and replacing them with new borrowing - or not, which is simply paying them off.
As the government both sets the liquidity ratio and determines how much it will raise in bonds that gives it two mechanisms to control banks but there is yet a third. Taxation, not all taxation is there to pay for government expenditure, taxation can also be used to take money out of the economy either generally, most often through interest rates, or through targeted duties, tariffs and even tax credits to encourage or discourage specific activity, and those tax credits also 'create' money.
It's all a lot more complex than the simplistic model created by people who know about 25% of the story and what to present that 25% as the whole picture.
I know, but my intention here is to steer this (imv) futile discussion towards an authority on the subject, nothing more. Frankly, except for the political aspects of money creation, which have already been discussed ad nauseam, I have no interest whatsoever (in every meaning of that term) - god has gifted me a money free life.
In which case, if you did know anything at all about money creation you would be presenting the whole story, not just some small fragment of the overall picture
This what I have been trying to steer Fletch and Rolluplostinspace towards
But to date it’s all been futile
They seem to be stuck in their little fantasy world and won’t countenance any facts or authoritative theories that contradict them in their little bubble.