this post was submitted on 20 Jan 2025
144 points (98.6% liked)
Asklemmy
44417 readers
2134 users here now
A loosely moderated place to ask open-ended questions
Search asklemmy ๐
If your post meets the following criteria, it's welcome here!
- Open-ended question
- Not offensive: at this point, we do not have the bandwidth to moderate overtly political discussions. Assume best intent and be excellent to each other.
- Not regarding using or support for Lemmy: context, see the list of support communities and tools for finding communities below
- Not ad nauseam inducing: please make sure it is a question that would be new to most members
- An actual topic of discussion
Looking for support?
Looking for a community?
- Lemmyverse: community search
- sub.rehab: maps old subreddits to fediverse options, marks official as such
- !lemmy411@lemmy.ca: a community for finding communities
~Icon~ ~by~ ~@Double_A@discuss.tchncs.de~
founded 5 years ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
A somewhat political fact, but one that made some of my friends dumbfounded:
When a bank issues a loan, it generates that money literally out of thin air and credits that money to the loan account rather than using deposits they already had. For example, if you want to borrow $100,000, the banker approves the loan and doesn't hand over cash or move existing money around - instead, they just go on their system and credit your account with the sum, that's it.
While I think your point is true that its much more abstract than people realize. When I worked at a bank and we disbursed loans and credited/debited fees it was from "GLs" (General Ledger?) which were basically just separate accounts to help keep track. Like we had a "member service" one which was for basically anything with good reason. One time someone did a very large amount but he just basically got told to do it a different way.
Its all just in a computer. I could've accidentally credited someone a million dollars but it would've been realized when I tried to close my drawer and balance everything out. And the branch would have to be balanced at the end of the day so I assume the bank did as well.
On a related note banks take out loans from other banks. I think a lot of people don't realize that banks have savings accounts so they have money to lend.
As of March 2020 the reserve requirement for banks in the US is 0%.
What the fuck, who changed that? Seems like a horrible idea.
The Fed Board, apparently: https://www.federalreserve.gov/monetarypolicy/reservereq.htm
After reading through that page and the FAQ, I think it's because the banks should now be compelled to held reserves because Fed pays them a reasonable interest (close to what they would get if they give a very low-risk loan) on them, rather than it being a strict requirement. I don't know enough about economics to have an opinion on whether it's a good idea, but I feel like it's not too horrible? Like, maybe it makes some shitty banks even more susceptible to bank runs, but that's the reality of fractional reserve banking in general.
Which is why a "run on the Bank" or "Bank run" is unsustainable for Banks these days.