Re: Credit doesn't exist?!?


DarkProtoman wrote:
Zerge wrote:
DarkProtoman wrote:
What does this mean and how is it even possible:
I read some article on wikipedia about a guy saying, essential, that
banks are commiting legalized fraud, and the money to fund their loans
is created out of thin air. I forgot the link to it, so could you post
the link? Thanks!!!

A fraud, by definition, is an illegal act. Therefore the phrase
"legalized fraud" makes no sense whatsoever.

And yes, money is "created out of thin air". Basically central banks
authorize commercial banks to open new credit accounts for clients, and
assign to those accounts certain amount of money, which does not exist
in physical form, nor is backed by gold. There's nothing wrong with
this; central banks and commercial banks keep tabs on their computers
on how much money everybody has in their accounts. There's no fraud
behind it. What you are reading are brainless consipracy theories from
people who are absolutely clueless about economic matters.

I found the link:

http://en.wikipedia.org/wiki/fractional_reserve_banking#Criticism_of_banks_and_bank_loans

But, what keeps our money from becoming absolutely worthless, like
France's assignat and mandat?

You gotta keep in mind what money is. Money is just a medium of
exchange. I make a trinket, and sell it to you for $1 dollar. Then I
take that $1 dollar and buy the widget you made. Money is just a
mechanism to simplify the exchange of goods and services in the
economy. The money supply has to be increased/decreased as products and
services increase/decrease to avoid inflation/deflation, that's all.
There's no reason for money to become "worthless" if it is managed
properly by the central bank.

.

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