> Imposing such a requirement does not fundamentally change the nature of how money is created.
I never said that it did. I said that it imposed a limit on how much money can be created in this way.
> Increasingly less so. Especially since nobody buys a house with cash, and that's what most loans are for.
This is not a matter of nuance. If I sell my house for $500k, the buyer wires me $500k that shows up in my bank account. To complete this wire, the seller's bank has to move $500k of cold hard central bank cash to my bank. This isn't fuzzy or flexible. If the seller's bank can't do this, the seller's bank is insolvent and has to close its doors or take some other measure to get more central bank money.
It is true that I might then go buy a new house for $600k, using my $500k as a downpayment on a new loan. And if the seller of my new house uses the same bank as the buyer of my old house, only $100k of central bank money actually moved anywhere.
But if I don't do that, the banks are on the hook to actually move money comprising the full amount of the sale. The video I linked to upthread fundamentally misrepresents this fact.
I never said that it did. I said that it imposed a limit on how much money can be created in this way.
> Increasingly less so. Especially since nobody buys a house with cash, and that's what most loans are for.
This is not a matter of nuance. If I sell my house for $500k, the buyer wires me $500k that shows up in my bank account. To complete this wire, the seller's bank has to move $500k of cold hard central bank cash to my bank. This isn't fuzzy or flexible. If the seller's bank can't do this, the seller's bank is insolvent and has to close its doors or take some other measure to get more central bank money.
It is true that I might then go buy a new house for $600k, using my $500k as a downpayment on a new loan. And if the seller of my new house uses the same bank as the buyer of my old house, only $100k of central bank money actually moved anywhere.
But if I don't do that, the banks are on the hook to actually move money comprising the full amount of the sale. The video I linked to upthread fundamentally misrepresents this fact.