Micael
· 2w
I'LL PAY 21K SATS TO THE BEST ANSWER:
How do commercial banks “create money”? Is it money?
Why is it inmoral?
Why don't most people understand it?
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How do commercial banks “create money”?
They do not lend existing savings. They create new deposits out of nothing. A 100 deposit lets the bank lend 90 (or more), so total “money” rises to 190 while reserves stay the same.
Is it money?
No, in reality it is credit—new debt created by the bank. It is subject to different rules like the Law of Reflux and other market checks. However, because we don’t have a true free banking system, these limits are weak, and it ends up functioning as money in daily use.
Why is it immoral?
Not the act itself in pure free banking. But under today’s privileges—central-bank backstops, deposit insurance, and legal-tender laws—the state lets banks create claims they cannot redeem all at once, while shielding them from failure.
Why don't most people understand it?
It is invisible—numbers on ledgers, not coins.
