this post was submitted on 06 Jul 2024
168 points (98.3% liked)
Personal Finance
3803 readers
1 users here now
Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!
Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
Banks don’t actually lend out people’s savings. When they create loans, they create that money out of thin air. And fractional reserve banking (A.K.A. the “money multiplier”) is a myth.
Only insofar as you would say they destroy money supply when a loan is repaid. They just create a credit and a debit that cancel out.
Correct, the principal is essentially destroyed on payment. Once the loan is payed off, all the money that the bank had originally created has been destroyed.
Same with charging late fees, overdraft fees, etc. It's just all made up money.
This is a fundamentally different thing. When you go to pay the fees they charge you, you don’t get to create that money out of thin air.