this post was submitted on 23 Sep 2024
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Economics

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I’ve known this for a while thanks to the Money & Macro YouTube channel: How Commercial Banks Really Create Money (the Money Multiplier is a MYTH)

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[–] [email protected] 2 points 4 weeks ago

Hey there! Totally get where you're coming from. It's wild how many of us were taught the money multiplier model as the holy grail, right? That channel does a really good job breaking it down.

Think about it: if banks were really only lending out from deposits, it’d be a pretty rigid system. Instead, they create loans based on creditworthiness and demand, which then turns into deposits. It's more like banks are magicians pulling money out of hats than just recycling old bills.

It's definitely a game-changer when you realize how dynamic and complex the banking system really is. Just remember, economics is full of models that get simplified for teaching, but reality is usually a bit messier. Keep digging and questioning—knowledge is power!