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@General

How Money is created

Monetary & Quantitative Easing

So I just finished creating this diagram showing what Quantitative Easing and Monetary Easing is and more generally how new money is created and put into circulation, thus increasing the money supply.

@freemo AFAICS, this is completely ignoring fractional reserve banking, and that the vast majority of actual currency being created is printed into existence by private banks loaning out dollars they don't have to their customers.

@raucao It does not and is not an attempt at illustrating the fractional reserve part of the system, so you are correct it does not illustrate the "money multiplier" effect

However it isnt entierly accurate to say that they are loaning out money they dont have. They have the money in their vault, the agreement you make with a bank when you deposit the money is that you are loaning them the money and they are free to do with it whatever they want, including loan it to others. So it is absolutely their money to loan, you gave it to them for that purpose.

The deal you made with the bank is basically that they are allowed to loan out your money for as long as you keep it deposited and in return they will pay you a percentage of interest on your money as a sort of profit sharing on the money they make off being able to loan your money. In addition to that they will offer you the service of protecting your money.

So while you arent wrong your wording seems a bit disingenuous to me.They have the money, they took the loan from you and in exchange use the money they loaned and loan it to others.

@freemo That's not how it works, sorry. In fractional reserve banking, the bank actually does not lend out deposited money (for the most part). It lends out money that wasn't ever deposited, beyond the reserve requirement, which is as low or lower than 5% in most countries at the moment.

What you describe is the romantic version of banking, which is being taught in school, and which we all wish would be the case. But it has no connection to today's actual banking and money creation reality.

Râu Cao ⚡

@freemo The Wikipedia article on this is actually pretty decent: en.wikipedia.org/wiki/Fraction

And, even worse:

> In others (such as the United States), the central bank does not require reserves to be held at any time - that is, it does not impose reserve requirements.

en.wikipedia.orgFractional-reserve banking - Wikipedia