Re:Federal Reserve to increase interest rates by 75 basis po...
by hot_gril on Wednesday September 21, 2022 @06:30PM
(#32932439)
A bank isn't creating money in the same way the Fed does. Yes they can increase the "money supply," which for whatever academic reason doesn't include the liabilities, but not the money in circulation. And they can only physically lend out the amount that's deposited, or legally more like 90%, and they're hosed if everyone wants their money back.
Only the Fed can create money out of nowhere. They can create endless dollars and owe nothing, diluting the currency permanently. Inflation and other metrics keep them in check. The common sense is actually right, not the overly technical explanation of lending that somehow concludes that the Fed isn't special.
> in theory it’s eventually repaid
It doesn't have to be, and it hasn't been. M2 has generally just gone up.
But under your argument, then the Fed doesn’t technically create money either. It lends money like any other bank. Now this money is created out of thin air, but in theory it’s eventually repaid.