• 28 Posts
  • 283 Comments
Joined 10 months ago
Cake day: August 28th, 2023
  • UraniumBlazer@lemm.eetoAsklemmy@lemmy.ml•What industry secret are you aware of that most people aren't?English
    1·
    3 days ago

    Or does the $900 they lent create a -$900 for the bank that is cancelled through repayment?

    Correct (effectively). Remember how you are “loaning” money to the bank by depositing money in ur bank account? Think about it - if someone loaned you money, and you spent it somewhere, would you have 0 money or would you have negative money (in terms of cash)?

    Interestingly, this is why Nordic countries technically have one of the highest wealth inequalities in the world. It’s because they easily get home loans as the government acts as their guarantors. Here’s a vid to explain this.

    Holy shit. I get it! That’s a great explanation and I really appreciate your taking the time to type it all out. I’m glad we don’t have Lemmy medallions to award but, if we did, I’d give you one.

    Awwww thankssss

  • UraniumBlazer@lemm.eetoAsklemmy@lemmy.ml•What industry secret are you aware of that most people aren't?English
    3·
    4 days ago

    I’m a scientist, not an economist

    I’m neither lmao. We just had a macroecon credit in my degree program, which is where I learnt about this.

    Halp!

    Now onto this… You’re kinda right but kinda wrong in that fractional reserve banking “creates money”. Here’s a way to think about putting your money in a bank. By opening a bank account, you are not putting your money in a vault. You are loaning it to the bank. The bank then loans it out to another person, who then “loans” it to another bank. Hence, fractional reserve banking is a natural side effect of this logic. What would happen if we had a 100% fractional reserve? Well, the bank wouldn’t be able to loan your money to anyone then. It would essentially become a vault.

    Therefore, fractional reserve banking is necessary to make loaning money possible. Loaning money is necessary for obvious reasons.

    Now to the “creating money” part. Sure, at the macro scale, you get a lot of virtual money in the economy. At the micro level though, individual banks aren’t creating money. They still have to get the money that they’ve lent out back. If they fail to do so, they’re going to go bankrupt. Banks would never go bankrupt if they could print money on a micro scale, right?

    Okay, so now let’s zoom out back at the macro scale. Now, you can accelerate or decelerate the economy by controlling the ratio of money that is in circulation vs money that is out of circulation. It’s simple- more money in economy = more demand = more profits = more investments in increasing supply to be competitive = more work done. If this demand however drops, profits drop, and increase in supply drops. This is very bad as no work will be done. However, if demand increases too much for essential goods (like food, housing, etc.), it is bad as it can cause problems for people till the supply can catch up. The economy is going too fast in such cases.

    Now, you can slow the economy down by many ways- by increasing interest rates, increases the fractional reserve and so on. This way, less people are going to borrow (you just reduced demand by this simple technique). You now reduced demand in your economy and slowed it down. The opposite can be done to speed the economy up.

  • UraniumBlazer@lemm.eetoMastodon@lemmy.ml•My opinion on Mastodon after 2 weeks...English
    0·
    15 days ago

    Never liked Mastodon (neither did I like Twitter, X or whatever tf it is now) because of the no-community nature of it. Therefore, can’t speak for Mastodon vs Lemmy.

    However, I do see the “why so serious” problem on Lemmy a lot compared to Reddit. It can be depressing at times honestly. Lemmy really needs to up its shitposting game. Unfortunately, I do find myself going to Reddit when I want to come across uplifting posts. I really don’t want to know how the world is inching towards fascism every day at such times.