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  • sandalbucket@lemmy.worldtoLefty Memes@lemmy.dbzer0.comModern Monetary Theory
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    5 months ago

    It’s called “Fractional Reserve Banking”. The bank only needs to have about 10% of a loan on hand.

    If a bank has $100, they can write a loan for $1,000; effectively putting $900 more into circulation. When that is spent, it gets deposited into a bank, which can then loan it out amplified again.

    This could create infinite money, as I understand it. Since there is not infinite money, there must be a gap in my understanding somewhere.