BoE wrote:The vast majority of money is created through the purchase of real estate via debt.When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.
So the bank doesn't create actual banknotes aka "money" - that should about cover it.
First lets realize that when you deposit money in a bank, you relinquish ownership to that money. it is legally the bank's money. You get an IOU in the form of the receipt. So before we go any further understand that the only "money" you have to your name right this second is the cash in your pocket and whatever you may have that someone may want to trade for at whatever price they want to give, which of course includes all the so called hard money. Everything else, checks, ATM cards, CDs, that cool app on your "phone" - those are merely promises from the bank to give you your actual money back..
So now that we are clear what "money" is ...
Banks are a facilitator between value (savings or real assets) and borrowers. They make illiquid assets liquid. They don't create value, they just make it accessible. Right? This is broader than my original position that banks loan saver's deposits but - I think - just expanding the meaning to include any hard asset, not just actual currency.
"The moment the bank credits that borrowers account money is created."
No, no money is created, just as stipulated at the begining, the banks don't normally pass out greenbacks (or whatever your national flavor) they merely jot down a couple of entries and hand you an IOU. If tomorrow everyone that got a loan asked for cash, everything would stop. Ditto if everyone decided to take a run at the bank. Back when we used to talk about prepping here I always said to keep a wad of cash because whatever you might think you have in the bank is just a promise. People recognize Benjamin, they don't have to be a numismatic or assayer to know his nominal value. They certainly would not trade anything for a bank receipt, LOL
I'm gonna do a little story like Dino did but I have already pointed and clicked too much for one day.
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves -- in their separate, and individual capacities.
-- Abraham Lincoln, Fragment on Government (July 1, 1854)