@Alantwatts23 In detail :)
The truth is, anybody can create money. The problem is to get it accepted. Both banks and government are very good about getting people to accept their IOUs as money.
The truth is, anybody can create money. The problem is to get it accepted. Both banks and government are very good about getting people to accept their IOUs as money.
@Alantwatts23 The government does it through threat of force: you have to pay your taxes with government money, or else the gov will jail you. The banks largely do it through the carrot rather than the stick: they offer nice things like checking services, interest, convenience, etc. And the
@Alantwatts23 gov assists the banks by providing deposit insurance and a lender of last resort, so your bank money is safe.
But there is a hierarchical relationship here: only gov money can (ultimately) be used to settle taxes, bank money cannot. The banks stand in between gov and us, making
But there is a hierarchical relationship here: only gov money can (ultimately) be used to settle taxes, bank money cannot. The banks stand in between gov and us, making
@Alantwatts23 payments to the gov for us. You can think of there being a hierarchy, or a pyramid, of money, with the gov on top, then the banks, the non-bank financial firms and other business credit, then the IOUs of households. Each layer, on average, pays each other using the IOUs of higher
@Alantwatts23 layers. The pyramid also expands and contracts as entities extend credit, or repay debt.
