[inconceivable]

i think the thing that people have a really tough time with is the fact that they create money out of thin air. that's really what happens. they hand you made-up cash and create a negative bank account for you to pay back.

the opposite happens when you buy a government security or a corporate bond, except you had to get that cash from someone else, not create it on your own.

it gets really weird when you borrow money to buy more money.

[arcticbull]

It's not made out of thin air, it's backed by your obligation to repay the debt that created it and the faith in the legal system to enforce said debt obligations.

Corporate debt is basically exactly what you described... and I assume by 'government security' you mean debt, in which case I have more bad news for you. It's all based on faith in the legal system to enforce debt obligations.

[inconceivable]

in other words, out of thin air.

[arcticbull]

Absolutely not. Increased borrowing meeting the lending standards is a proxy for economic activity and the system is designed to expand money supply into increasing demand for money. The fact that the issuance itself doesn't consume countries worth of power is a feature, and it doesn't mean that it's backed 'by nothing' - it's backed by the economy and the legal system, and created in response to demand. Zoom out a little bit.

The system itself is actually quite elegant and has functioned very well over decades and a wide variety of market conditions.

Remember despite new money being created now in loan issuance the aggregate supply is shrinking so it's silly to look solely at issuances and say they're 'out of thin air' when the system is actually reducing the supply. Look at the whole thing, not one slice.

[inconceivable]

this is where the midwit meme comes in. NOooooooo it's not out of thin air don't you understand?!?!