Our monetary system

[JG4_Helofly]

Originally Posted by arthursmedley

Er...your idea of how banking works is false. Commercial banks do not create credit out of thin air. I think you may be confusing the idea of "quantitative easing" whereby central banks have electronically created credit they transfer to commercial banks to facilitate lending (or create asset bubbles).

No. It's not false. The money which is lend by a bank did not exist before. It's true that initialy a relatively small amount of money comes from the central bank and goes to the commercial banks, but the commercial banks can lend more money then they get from the CB. Otherwise every bank would have a 100% backed reserve and that's not the case. The min. reserve must be around 7%.