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(lemmy.world)
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this post was submitted on 21 Aug 2023
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I'm not an economist but I don't think money gets actually created in either of your examples, the money just changed hands in either case.
You are 100% correct and its amazing how accepting people are of that bullshit answer. Both the examples are transfers.
The value of stock is a reflection of value gained typically by capital investment and it's not just magic new money that comes from thin air. People have to get the money to buy the stock from somewhere. So they probably sold another asset and decreased it's value marginally.
Fractional reserve lending doesn't just make new money either. It lets the same money be spent over and over, which is not new money being created. If I loan you $100, and you loan Bob $90, Bob loans sue $81, so on and so forth, they're just lending smaller amounts of the same $100. You're still owed $100 and the entire chain is based on just that $100. This money moving through the economy more times is a term usually referred to as velocity and can have a massive effect on inflation or deflation, but it is most definitely not creating money out of thin air. For every dollar "created" someone owes the dollar, so their net worth does not change.
There's some dum shit going on with central banks these days and things like quantitative easing, but spreading silly nonsense doesn't help anyone. If the numbers in the meme are accurate it's like just talking about new dollar bills being printed. BECAUSE PAPER MONEY WEARS DOWN FAST AND NEEDS TO BE REPLACED CONSTANTLY.
I'm sure this meme is brought to you by crypto bro TM. All money is fake and made up crazy stuff, so buy my new money. It's the best money, cuz it's a scam like all money.
Fractional reserve banking literally creates money. If you have the only $100 in existence and put it in a bank, they can then lend $100 to someone else, now $200 exists. You still have that $100, and so does the person that got the loan.
Not at all true, they're lending the money in the bank. If you withdraw the money the bank can't loan it anymore it's the same money, just in different hands. It creates more circulation of the money through the economy but there isn't more money created with magic.
The bank loans your money and pays you a portion of the return in the form of a savings interest rate. In essence the bank is just the middle man loaning your money to someone else. There's no creation of new money. It just puts money that would be sitting idle to work.
There's so much misconception about all this due to people looking to criticize the government/fed oversimplying complex policies to sound bites. Putting more money into circulation in the economy doesn't mean money is created. It just means more is being used. There's many policies that effectively create money, like quantitative easing/bond purchasing.
If you withdraw your $100 the loan doesn't disappear, it still exists. The Bank has $200 on it's balance sheet despite only $100 existing at the start. That money got created.
Except the bank has far more than $100 and the amount of money they have to loan goes down $100. So rhere's now $100 less on their balance sheet. Don't worry, your definitely right. I'll just pretend I didn't take multiple money and banking college courses so you can have this one. Clearly your made up bullshit win.
I'm going to start holding onto my friends money and making loans with most of it. Then I'll get to keep the magic money that appears. I bet it will just fly out of my asshole.