I believe your premise is incorrect. Modern "fiat" money isn't "created out of thin air". It is borrowed into existence. That means for every dollar or other currency unit out there, there is also a corresponding obligation. This means there is at least the potential for a currency "squeeze". due to de-leveraging. We had the …
I believe your premise is incorrect. Modern "fiat" money isn't "created out of thin air". It is borrowed into existence. That means for every dollar or other currency unit out there, there is also a corresponding obligation. This means there is at least the potential for a currency "squeeze". due to de-leveraging. We had the beginnings of one in 2008. Then governments became the borrowers of last resort to kick the can down the road for a while longer. It will be quite interesting to see what happens this time...
It sounds like what you are saying is that it doesn't exist, until by the act of someone borrowing it...it is created? And isn't that pretty much the premise of fractional reserve banking?
Yep. I don't think any western government has engaged in raw printing of true fiat money. And yes, fractional reserve banking can (and usually does) multiply what the government borrows into existence.
However you look at it, it sure seems like creating something out of nothing, regardless of whether it is physical paper or electronic and regardless of who is doing it, though, doesn't it? The only value in it is in the perception that people have of it.
- I don't pretend to know what the future holds, but I do feel very strongly that nothing is as it seems, and that things are not going to be returning to any semblance of what we have considered "normal", probably ever again. Time will tell. Prepare for the worst, hope for the best, and with any luck we will all end up somewhere in the middle.
I believe your premise is incorrect. Modern "fiat" money isn't "created out of thin air". It is borrowed into existence. That means for every dollar or other currency unit out there, there is also a corresponding obligation. This means there is at least the potential for a currency "squeeze". due to de-leveraging. We had the beginnings of one in 2008. Then governments became the borrowers of last resort to kick the can down the road for a while longer. It will be quite interesting to see what happens this time...
It sounds like what you are saying is that it doesn't exist, until by the act of someone borrowing it...it is created? And isn't that pretty much the premise of fractional reserve banking?
Yep. I don't think any western government has engaged in raw printing of true fiat money. And yes, fractional reserve banking can (and usually does) multiply what the government borrows into existence.
However you look at it, it sure seems like creating something out of nothing, regardless of whether it is physical paper or electronic and regardless of who is doing it, though, doesn't it? The only value in it is in the perception that people have of it.
- I don't pretend to know what the future holds, but I do feel very strongly that nothing is as it seems, and that things are not going to be returning to any semblance of what we have considered "normal", probably ever again. Time will tell. Prepare for the worst, hope for the best, and with any luck we will all end up somewhere in the middle.