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by ThomPete 4286 days ago
Creation of value doesn't even give us money anymore. Money are now days created to keep the system stable. There are far more money in the system than there have been value created.

When a bank for instance in Denmark lends you 300.000USD it actually ads 300.000 to the economy out of no where.

We live in a world where there is no direct correlation between the value of goods or services and the creation of money.
2 comments
gusfoo 4286 days ago
> When a bank for instance in Denmark lends you 300.000USD it actually ads 300.000 to the economy out of no where.

No - it does not. You have completely misunderstood how money works. There are two entries in the ledger, not one. The credit of 30K and the liability of 30K which together cancel out. The only surplus comes from interest and fees.

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fennecfoxen 4286 days ago
No, he's actually right. Banks create money and it's totally a well-known recognized widely-accepted economic phenomenon, and it is trivial to look up the logic -- use Google.

The thing to criticize him on is the idea that the money is "not related" to the economy. If you borrow $300,000 USD, it's precisely because you plan to use that money to make a difference in the economy. Moreover, broad statistics are available on price stability, tracking the value of money against a value of a basket of goods like the "consumer price index". Most years the value of the dollar is stable to within 2%. If you actually want crazy uncorrelated money-creation in USD you'll have to go back to the 1980s.

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ThomPete 4286 days ago
Yeah I might have overstreched on that claim. What I meant to say is that it's increasingly uncorrelated.
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zo1 4286 days ago
He's referring to Fractional Reserve Banking, have a look at the wiki page for more info:

https://en.wikipedia.org/wiki/Fractional_reserve_banking

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ThomPete 4286 days ago
Sorry but I am not wrong at all. That is exactly how the system works.
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fennecfoxen 4286 days ago
> There are far more money in the system than there have been value created.

Poppycock of the highest order. The US economy generates about $16.8 trillion a year. Its wealth is estimated at ~$120 trillion. M2 is about $11 trillion.

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ThomPete 4285 days ago
What is that proving?
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