Re:Two thought experiments to evaluate automated stablecoins
by majormajor on Thursday May 26, 2022 @10:56PM
(#31525615)
That's not the sort of bank being talked about here in terms of "money multiplication." That's more like a VC firm or other institution.
If you could open a bank, accept 10 dollars in deposits, and loan out 100, you'd do it! You'd loan it out to your best friend and keep the cycle going until you're rich AF.
You can't loan out more than you have, but even loaning out 10 of 10 dollars has some risk - if someone comes for their money and you can't get your money back from the people you loaned it to. And it definitely increases money in circulation since it's not parked there. But it's not a magic money printing machine.
If you could open a bank, accept 10 dollars in deposits, and loan out 100, you'd do it! You'd loan it out to your best friend and keep the cycle going until you're rich AF.
You can't loan out more than you have, but even loaning out 10 of 10 dollars has some risk - if someone comes for their money and you can't get your money back from the people you loaned it to. And it definitely increases money in circulation since it's not parked there. But it's not a magic money printing machine.