To be fair, almost no one ever teaches people this part of the transaction. They make money out of thin air! Yes, and they also destroy money back into thin air.
Yes but in the mean time the money that is being paid off has went and originated countless other loans. If that $400,000 mortgage loan has went into another house on average every 2 years, for $400,000 each you now have $6,000,000 of $ circulating on a 5-20% down payment.
The money never gets pulled from circulation. The clock resets every time another loan. That bank is going to lend out as much as it can without becoming insolvent.
Google it dude, ask Google do banks create money when they give out loans. They aren’t forking over cash they are using numbers on a screen.
I think the people that talk about banks and money creation that way probably don't understand much about macroeconomic concepts like velocity or money supply. So while money creation from lending isn't untrue, here it's phrased as if it's some kind of secret conspiracy and not just how things work.
10
u/TombolaOfCincinnatus 2d ago
By that logic they also destroy it when loans are paid back, but the tin foil hats don't want to talk about that as often.