Comment by phony-account
4 months ago
> How it it different from what banks do?
I often read this sort of comment from crypto-defenders, but is it what banks do?
I’m relatively naive about these things, but my impression is that a bank losing this proportion of their assets can’t just ‘pretend’ they have the money, or create ‘new’ money.
That's because they're mistaken. In traditional banking only the central authority can print money, not the individual banks.
If someone stole a trillion dollars from JP Morgan, JP Morgan can't make themselves whole by creating a new trillion dollars.
The central authority might guarantee the customers of JP Morgan that their money is protected, but they won't print money to make the bank whole.
That's one model/theory for how modern money creation works.
Another is modern monetary theory (MMT), and in that, commercial banks are indeed the primary creators of money, with the central bank playing a technically more passive role.
Still, in either model of money creation (i.e. classical "money multiplier" and MMT), governmental regulators (which can be the central bank or others) do ultimately control the rate of money creation via various mechanisms.
False. Banks create money. https://en.wikipedia.org/wiki/Money_creation
Banks create money by issuing loans; but they can't create money out of thin air if $1.5B was stolen from them.
Banks create credit within the confines of law. That isn't creating money. Only the central bank can do that