Bitcoin Forum

https://twitter.com/i/status/1154006471601991680

So the government takes a loan from a bank, tells the bank they are going to pay them back and then some (not sure how that is possible, without getting more of a loan to get more into debt) Then the goverment owes the bank for doing this?

It's called fractional reserve and has been happening for years since we ever departed from a gold standard. Welcome to the post Nixon era.

The government are only responsible for a small amount of new fiat which enters circulation; the banks are responsible for the majority by issuing loans under the fractional reserve system.

Let's say you deposit $100 with your bank. The bank credits your account with $100, and then uses your money to loan out to other customs, keeping a "fraction" of it in "reserve" (lets say 10% for the purposes of this example). The bank keeps $10 in reserve, and loans out $90 to customer A. Customer A spends that $90 with a business, which then deposits $90 in to their account. The bank moves $9 to its reserves, and loans out the remaining $81 to customer B. Customer B spends that $81 with a business, which deposits it to their account. The bank moves $8.10 to their reserves, and loans out the remaining $72.90. And so forth. Take this down to its conclusions, and the total amount of new money entering circulation based off your original $100 deposit it $1,000, ten times as much. This is known as the "money multiplier".

This is the fractional reserve system. The banks only ever have a fraction of all their account balances in reserve, and why a "bank run" is possible; too many people trying to withdraw their money all at once can cause the bank to collapse as it quickly runs out of reserves.

I got attracted to the actual video on the tweet and the discussion (or argument) on Bitcoin. And I would wish that the topic of cryptocurrency could be as polarizing as it is in America and some other nations in developing countries.
And I think it's down to the involvement of citizens. If more people got involved in cryptocurrency in Nigeria for example, it would become a topic of political debate and attract more attention.


In this case could the central banks print more money to cover the rush and prevent a collapse?

Fractional reserve is also a thing of the past

It is a very common and widespread misconception to think that banks are somehow limited by the deposits that they have received (what fractional reserve is essentially about). In the modern day money is created via credit (it is called credit money for a reason). Banks don't need to look back at how much they have in their vaults as they can create as much money as required to meet the demand for that money. And if you think of it, it actually makes perfect sense since this is a very effective mechanism to provide liquidity for the economy in case the latter needs it. In other words, there is no reason to limit credit via a metric which doesn't in the least reflect the actual demand for new money

Sure, a bank could borrow from the central bank, such as the Federal Reserve, which in this case is known as a "lender of last resort". This is more-or-less what happened during the 2008 financial crash when the banks were "bailed out". It introduces a number of problems, not least the fact that the tax payer ultimately has to bear the burden of the bail out.

Correct. It is fully known as the "credit theory of money". To follow on from my example of fractional reserve above, in credit theory the bank doesn't even need a deposit to start lending out. They simply create a $100 credit of new money in your account, whilst at the same time debiting you $100 in a new payment request. From the bank's point of view there has been no net change; their reserves haven't changed and their balance book still has the same bottom line. However, $100 of new money has just been created.

Oh, I get it now, We just create a supply of money out of thin air and expect everyone else to work for it? ahh sounds like $lavery, oh not to mention now you have to pay interest on that $100 that does not even exist compound or not.  

What a fucking great system my doods.

https://media1.tenor.com/images/caffa65f97857431b12920075ad63231/tenor.gif?itemid=5571475


LOOK AT THIS ONE HE IS GOING HEAD OVER HEELS FOR IT
https://media.tenor.com/images/0d221b3c66cb7b2a1d2089ca296af685/tenor.gif

Now you see why so many of us are interested in bitcoin. :D

https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcQnVyDYX0F8i2J-dcdTX-XGf5GhZrJXrRgbBLm4irVW-_tvODR7mw

I think he meant it Literally he just did not want to get JFKED

Accounting rules may be different across the world

But where I live (Russia), the net balance (the balance book in your speak) gets increased by the amount borrowed. The reason for that is simple. The money thus created increases both assets and liabilities of the bank as the credit (which is the bank's asset) gets credited (yeah) to the borrower's account (this deposit then becomes the bank's liability), and the bottom line necessarily gets augmented. It also makes sense as the bank is typically offered some form of collateral. In this manner, it is not quite correct to speak of this money as printed out of thin air because technically it is a collateralized form of money


It is not that simple, either. The money is still created based on demand for credit, while the latter should be secured by enough collateral (well, at least in theory). So it is not like a bank can print money nonstop 24/7. No honey, no money

Sir if what you just said is true, there should be no money in circulation.

Based on demand for credit? you mean debt? to the bank, with interest and in order to obtain that interest (compound or not), more debt (not credit) must be accumulated. SPOILER: IT DOES NOT EVEN EXIST

So yes a bank does magically print the money out of thin air and clearly they are doing it unlimited because we don`t know the supply cap of USD or EURO`s OR any fiat for that matter of fact, to supply the "credit" AKA debt to a person. That person now has to obtain money that does not even exist in order to pay the debt back.

https://www.usdebtclock.org/world-debt-clock.html They will all be negative in the future, for one country`s gains is another`s loss and the loss has interest on it.

Yes they do print the $cam unlimited 24/7 and create money non stop, or there would not be  $80 trillion +++++++++++++++++++++++++++++++++++++++++++ fiat dollars in bank accounts in existence, with the number just growing 10 fold each year.

Fractional reserve banking existed under the gold standard. There were many bank runs and financial panics in the U.S. when the dollar was fixed at $20/oz. That was the reason for creating the Federal Reserve.

BTW, I believe that we will see fractional reserve banking with Bitcoin, too. And, that is why I don't think a bitcoin will ever be worth $1 million.


So you are saying that this is a misconception: 12 CFR Part 204 - RESERVE REQUIREMENTS OF DEPOSITORY INSTITUTIONS (REGULATION D)

"I believe that we will see fractional reserve banking with Bitcoin"

Bro it already happens on almost all of the exchanges.

It is basically a test on how well you (not necessarily you personally, of course) understand what FRB refers to and is essentially about. Simply put, FRB says that banks can create credit only out of deposits that they have received (using a multiplier, hence fractional), but this is not how the modern banking system works, end of story

I didn't read this regulation (so bear with me) but I guess these requirements demand that a bank should keep some cash in its vaults in case borrowers want to take cash. But that in itself doesn't change anything in the process described above (deposits via credit and not the other way around). The word reserves, or even reserve requirements, doesn't make it fractional reserve banking

And in Canada, for example, there are no reserve requirements (if I'm not mistaken)

" A bank is always inherently bankrupt, and would actually become so if its depositors all woke up to the fact that the money they believe to be available on demand is actually not there. " Source : https://mises.org/wire/why-fractional-reserve-banking-would-be-limited-unhampered-market

So you create money from thin air by practicing Fractional reserve loans and the Reserve Banks keeps the liquidity in tact, by printing more toilet paper money.  ::)

More info on the subject : https://mises.org/library/austrians-fractional-reserves-and-money-multiplier

This is no longer relevant in today's world

People are still citing sources which were true for the 19th century banking (okay, for some part of the 20th as well). Today, most money is cashless anyway, and much of it is just figures on the central bank accounts. So whatever amount of money is demanded by the "depositors" (even the very idea of a depositor lost its meaning since it is more like a borrower these days), it will come down to simply changing entries in these accounts (i.e. debiting one account and crediting another). It is a non-issue because the modern money is fiat and as long as the accounting is right, there will always be enough money for any legitimate claim on it, per definition

You are correct. Canada removed their reserve requirements in 1992; however, lending is still restricted by capital requirements. I am skeptical of your statements because you seem to be unaware of the details.

Reserve requirements are there for a reason

These requirements are imposed by the central bank to limit the risks of a possible banking, and more broadly financial, crisis due to massive defaults of borrowers (read, it is not about depositors cleaning up bank's vaults at all). It doesn't always work as planned, of course, which the US subprime mortgage crisis of 2008 has clearly shown, but if there were no defaults, then there would be no reason to artificially limit lending. As I have already explained above, credit money is a collateralized form of money, so it is not like this money is not backed up by anything. It should now be easy to see that these limits have little to do with what FRB generally stands for

It was created by the banks by backing up their gold resrve but now a days the fiat money printed on no bases,they keep printing fiat as much as they want and issue the loans to get the prices inflated and keep on going.

I do hope they'll do it and then crash their system without any possible recovery and then sound money will be the standard in the market. Bitcoin should be one of the alternatives for that.

Yes. That is how it is done.
Only the banks can create it but the government have the authority to make it happen.

I dont know though if banks can create on their own. I bet they cannot.

That is why you can tell banks and government are like one only or they will keep the bank safe for they have loans from it.
Government will pay it by the means of tax and then Voila the banks have money again to loan someone else.
Who wins here?
You want to create a banking business with me? ;D

This is why assets will continue to pump while poor people remain poor.  They will keep printing money to prop up the stock market and housing market while people with cash in the bank are the biggest losers from this.  People have so much faith in the usd but it is really just an illusion run by rich people.

Crashing might happen only if hyper inflation or else people won't acknowledge it because the inflation rate is just same as the interest rate of banks so which means banks are collecting our money and just keping it.People are also not good at learning how this sytem works.

As you see, almost every country has loan from each other which is a huge amount of money in overall, so how? Imagine we are 3 person and I have loan from you, then you have loan from person B and person C has loan of me. If we have loan of 50$ from each other, it can be considered as 0 but as we see, countries have really a huge amount of money as loan. So how is that possible? That's why I amn't fully against printing USD by USA, seems there isn't enough money in this world.

People with money in their bank account shouldn't complain about losing purchasing power because we have enough historical evidence that the best course of action is to invest, especially in the current market.

People not that long ago thought that the US stock market was about the implode, but it jumped back up to hit new all time highs. It's safe to say that as long as the money press is running, the stock market will inflate even further.

It's almost irresponsible to not invest in the stock market with a chunk of your fiat. Cheap money will always end up in the stock or real estate market for the most part, and luckily, also in Bitcoin in the more recent years.

Better to loan money from your own central bank then order them to print more USD for you. You are just devaluing your own money by that method. Just look at Venezuela or the classic story of Zimbabwe's hyperinflation and see where did it go from their. That's why you will always see them ask for loans with the lowest interest as this gives them enough room to pay them back on the certain period they have. Even if the debt is rising still they are able to pay back woth the projects, jobs, educations, and other developments they have given for their own country.

Sounds more like fractional reserve banking. I think banks and most countries do it.
The biggest fraud however is the printing of money in secret to live beyond one's means. The abomination is by far worse than the worst fraud in Crypto space and it is most likely practice by all governments. In my opinion, if you take this away from them, poverty will most likely cease to exist

Thank you so much for this information. I realized now that it might be the main reason why you can't just withdraw as much as you can on a certain bank(I am referring to the maximum cash withdrawal per day). Because they were trying to protect a possible bank run. I can now differ to a bank's capabilities on how much their reserves are performing the higher the maximum with per day the higher the reserved that they have.

I think a possible bank run will never happen in the Philippine banks. Because aside from having a maximum daily withdrawal on the atm machines. The slower services will affect the total number of people who can withdraw during that day period

It is still possible if everyone withdraws on the same day because banks have limited cash available for short term withdrawal. You could also check its solvency/current ratio to know whether your bank is healthy or not.

Anyway, don't worry too much about a bank run because the probability is low. Hence, it would be more beneficial if we talk more about inflation/debasement part of this discussion.

These limits are for cash withdrawals only

But since it is lawful and legit to cash out freely for individuals (but not for businesses), banks have to set the limits as it would be extremely impractical to keep so much cash in their vaults on a day-to-day basis. If there is a need for more cash, banks ask for it in the Central Bank's cash department in the area of the bank's residence but that takes time, hence the limits (apart from AML policies and other such stuff). Again, this has nothing to do with the idea of a textbook FRB as this is more about how a currency is run in real life

Agreed, but what difference is there between creating money from thin air by using Fractional reserve practices or by doing this by creating "fake" money via credit? Adding some numbers on an internal ledger to give more credit are exactly the same as adding additional money by lending money that you did not receive via deposits.

The Banks and the Reserve Banks are cooking the books to create money from thin air and that is the crux of the matter. Bitcoin are often criticized for creating "digital" money from thin air, but this is predetermined and fixed supply, not something that can be changed without majority consensus. < This is why BankCoins are so dangerous, because the Banks have control over the supply of these tokens. >  

It is a difference that makes the difference (and vice versa)

You seem to be looking at it from the wrong angle as you implicitly assume that credit money is inherently wrong or even evil. The money created via credit is not "thin" money, so to speak. It is still a collaterized form of money, i.e. money backed up by tangible assets (think of it as an extended and expanded variety of the gold standard). But with "classical" FRB you are limited by the deposits, while with purely credit money you are only limited by the demand for credit. So the second form of credit money is better for the economy because money gets created (and destroyed, for that matter) according to the needs of that economy. Simply put, it is a better device and more robust mechanism for providing liquidity to economic agents, i.e. those who need this money (businesses and individuals)

Also the reason why inflation rates in some countries are beyond the skyline and people are thinking how to get their daily bread earned without going broke and also having enough money for daily expenses. Some countries have been able to control it although partially and temporarily but the things keep breaking out every now and then causing panic in the general population. :(

Printing of fiat continuously have been the reason of inflation and economic collapse, but then again governments dont want to recognize this as a threat or look for alternatives to correct this problem.

How is it, though? If I apply for a loan of $1,000, the bank simultaneously gives me a credit of $1,000 and a debit of $1,000. I get $1,000 of new money in my account to spend, whilst also having an outstanding bill for $1,000. Nobody gives the bank any assets to back up that $1,000 they have just created. No money or assets are added to their reserves. The only thing backing up my new $1,000 is a promise that I'll pay it back in the future.

Creating money out of thin air simply because there is a demand for individuals and businesses to have more money is neither good for the economy nor sustainable long term.

Wait what? The government does not loan on banks. Government loans on other country with collaterals or dues which has a percentage of interest. Not only that, this loan depends on gold reserves of a country and this is not a regular banks they do the loan.

No bank will give you anything on an empty promise

But I think you know that better than myself (though I know that too). The word collateral is there for a reason, and all banks will require you to secure the loan by providing liquid collateral for it. If you fail to return the money borrowed, the bank will take the collateral and sell it. Indeed, its price can drop in the process, but that's why loans are typically overcollateralized. Sometimes it doesn't help, but it is a completely different story


As long as the money thus created is properly collateralized, this is a non-issue and technically not much different from a hard currency backed up by gold

It seems to me that people began to forget that any money (cryptocurrency or fiat money) has no value. People gave them value only because it was an accepted measure of something. In any case, the state is trying to regulate fiat money. But they fail. Therefore, cryptocurrency is much better than fiat money, I think.

I can find many theories how USD are created, some of them seem acceptable to me, and they believe new money is created whenever people like you and me take loan from the bank, and it is also how the shadow banking in China was so rampant in 2016, these shadow banking are creating credit at a speed of light and it is also unregulated, I’m not sure what will come next but some experts are screaming bubble is about to explode, I think it’s all the shadow banking who create USD too, but I don’t know who is their target “victim”.

No they create usd by printing it in federal bank. Like the time they printed 800 billion!!! dollars back in 2008 to get the banks out of debt and nothing really happened. Like the banks covered their debts and paid the CEO's bonuses and all that after which no one got fired and no one went to jail.

So, all in all its quite expected and known for government to print money whenever they want, of course its a federal bank that is whole another branch that doesn't have to do what government requests them to do, they operate independently but when congress passes a bill all together demanding it there is rarely a time when federal bank will ever decline. Hence they just print money out of thin air with absolutely no backing at all and than money loses its value just to cover some peoples debts.

They will, though.

Sure, things like mortgages or car finance are collateralized against the value of your home or your car, but lots of loans aren't. I could get a brand new credit card today with a five figure spending limit, based solely on my past behavior, and without providing any collateral. People take payday loans based on the promise of future income. Starts ups looking for business loans often have little in the way of collateral to provide. Sure, the bank could come after you for damages if you default, but that's not the same as them having assets to back up the loans they provide.

The entire modern banking system is based on the fact banks can create money without having the assets to back it up.

I have learned so much from this thread that I didn't got from economics and finance subject in school. If the government creates billions paper bills out of thin air, so its just the central bank that decides it value? 


There was a documentary I've seen years ago where it says China deliberately set its currency value to be lower and so they start to climb up to attract investors and open their country for investors, create certain places for trades like Hongkong.

At least in the juristictions I know, it's not easy for a startup without collateral to get a loan by a full-fledged bank. Most of the time they have to reccur to angel investment, venture capital and other "non-banking" financing methods, where risks for the financing parties are higher but they also participate in the company (with voting rights) they support. And this kind of investors/financial entities does not have the right to "print money" like banks have.

After all, nobody should forget that money is only a means of communication between consumers and producers. If there was a party which "prints out" values that are not reflecting the "real" state of the production sector, that would lead very likely to high inflation. That's basically what happened in Venezuela, Simbabwe or late-eighties Argentina where the Central Bank policy failed completely, or what happens to every shitcoin that has nothing to offer for the "money" they print.

PS: There is however a criticism to "fiat money" creation I support, and that's the Cantillon Effect (https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_theory). Basically, it postulates that if there is inflation (even low), typically there will be a group who benefits first from a money supply increase, and those who benefit last will see their share of society's income and "prosperity" decreased.

This is definitely not an empty promise

But you wouldn't really expect a random dude from the streets to get a five figure credit on his word alone, would you? Also, a five figure amount can be anything from 10k to 100k and in what currency exactly? Regardless, how many people are willing to lend coins here to a fresh account? I don't think that many if any at all. So why should banks be different? Anyway, the loans you are talking about won't make a dent in the bank's balance if the borrower defaults on his debt, so my point still holds overall


Startups are typically looking for venture capital, not bank credits


Okay, let's agree to disagree here

I don't know exactly how much, because I have no inclination to apply for a credit card and find out exactly. But everyone who opens a credit card gets given a credit limit. Some may get less than $1,000. Some may get as high as $100,000. For every single one of these credit cards, the person opening it does not have to provide a single piece of collateral. The credit given to them is based entirely on how likely or otherwise the bank they are to repay that credit - i.e. a promise. The bank does not increase its assets at any point; it simply creates new credit, and therefore new money, out of thin air.

That's not the point I'm making. Obviously the bank can absorb the loss of some loans; the point is that the money from these loans was created out of nothing without the bank increasing their assets or reserve at any time.

I guess what you describe has more to do with a credit history of a particular borrower, so if you defaulted on a loan before, you are unlikely to be approved at all. If you have no credit history, be ready to provide some form of collateral. Either way, you are risking your future loans. That's not a mere promise in my eyes


That's not necessarily so

A bank may in fact have real depositors who brought their hard-earned cash to the bank. Then the loans in question can be given out of these deposits or covered by them. In this case, you can't possibly say that the money for such loans was created out of nothing

The reason behind Venezuela and Zimbabwe's hyperinflation is too much printing of money. As of now, the citizens of these two countries are suffering from poverty. Because of the inflation rate, the countries are dying. Maybe, a loan can be a solution for inflation yet it may also ruin the economy. Just like what happen in Greece and Germany. Greece loaned too much for Germany and as a result for collateral, Greece will pay their through their own land.

Honestly for anyone that is wondering how the money world is run and can't understand how world is in debt (considering we can't owe money to space, there is more debt existing than money that exists for some bad math calculation) you can read "I want the earth plus 5% more" and that will tell you how the system is crooked.

Normally, when someone gives you loan they should bring money for the interest as well but since interest wasn't printed not everyone can pay back their loans which creates a system where people are not paying their loans and there is this excess amount of money that is not being paid to anyone but banks still get their money somehow. I am not entirely sure how long this can continue but we all know its not sustainable and eventually will come to a full stop instead of a small slow down in 2008.

Correct, but the risk of of not being able to take out any futures loans is a loss for the customer, not a gain for the bank. The bank does not receive any new assets or reserves from refusing to offer loans to customers who have previously defaulted.

Sure, but then the money in the depositors account is now no long backed up by reserves. Let's say I deposit $1000 at a bank, and then bank then loans that $1000 out to you. The next day, I decide I need to withdraw my $1000. Does the bank say "Sorry, you can't withdraw, it's out on loan"? Of course not. They give me my $1000. Now you have $1000 on loan and I have my $1000 back. Somewhere along the line, $1000 has been created out of nothing.

You will never convince me that credit is "good" money creation. If people were able to pay the debt, it would have been acceptable, because it stimulates the economy, but most people default on their debt, because they should not have qualified for that debt or their circumstances change and then they cannot pay that debt anymore.

The ridiculous interest on that debt also generate "new" money, which is also bad. The Bitcoin supply is fixed, so you cannot create tokens out of thin air.  ;)

But it doesn't receive them even if it approves the loan

Remember you are talking about uncollateralized debt, right? In this way, if the bank refuses the loan to someone without a credit history, it doesn't run the risk of a future default but it (or some other bank in the system) has already incurred some losses from the past default of this borrower. As you can see, it involves a little more than just a promise of a random dude from the street. In short, empty promises don't work. You need something else, more solid


Um, I'm not sure what you mean by this. The money in the bank "depository" is the reserves which are used to back up a loan


Are you sure you know how deposits actually work? It is in fact more like ""Sorry, you can't withdraw until date X"


Okay then

With every loan there is still a risk of default, even with previously trustworthy people with good credit histories.

I'm not following. What is "solid"? When someone takes out a credit card, and gets a credit limit based on their previous behavior, what is solid? The bank receives no new assets. Their reserves do not grow. They get no collateral. They simply give credit based on how trustworthy they think the person is. What is "solid" about that?

Yes, but the bank's reserves come from other people's deposits. A bank can't give this money out in loans and keep it in their reserves. At some point, new money has to enter the system, and banks do this by creating credit out of nothing.

Basically, it is a one-off event. For a borrower. And technically, for a bank too, with that client. But with a world living on debt and in debt, this event would be pretty inconsequential


Maybe, solid as in reputation? It is hard to build and easy to destroy. Once it is ruined, there's typically no way back (as even this forum clearly shows and knows)


Okay, so you agree that presumably uncollateralized loans (like credit cards with a nice credit limit) may actually come from deposits, and in this manner you can't say that money for these loans appears out of nowhere. That seems to be a pretty solid conclusion (no pun intended)

Sure, but not solid as in there are any tangible assets transferred to the bank in order to obtain the loan or credit.

I never said that loans come from deposits. I said the bank's reserves come from deposits. The bank can't simultaneously use this money as an asset to secure the credit in the depositors' accounts, whilst also giving it as credit to the loanees.

To go back to my previous example. Lets say I deposit $1000 to a bank. The bank now has $1000 in reserves, and I have $1000 of credit in my account. Lets say you now open a credit card, and they give you $1000 of credit. The bank still only has $1000 in its reserves, but now has $2000 of outstanding credit. New money has been created. If you were to physically withdraw cash, then yes, that cash might come from the cash I deposited to the bank, but the bottom line is still that the bank now has more outstanding credit than they have assets to cover it.

I'm not sure why you are arguing this? It is widely established and fairly common knowledge that banks create money out of nothing when providing loans to customers. Here is an article written by the Bank of England (one of the most important banks in the world, and which most other central banks are based on): https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Reputation is everything these days

According to Robert Greene (https://books.google.ru/books?id=afCxg5sogvAC&pg=PT82&lpg=PT82&dq=reputation+is+a+treasure+to+be+carefully+collected+and+hoarded&source=bl&ots=mCUSe-2VAC&sig=ACfU3U2aVk3FN9aVcAr42HyrvDU0LJoWzA&hl=en&sa=X&ved=2ahUKEwjDk5yIitfjAhVklosKHfTHA0gQ6AEwAHoECAkQAQ#v=onepage&q=reputation%20is%20a%20treasure%20to%20be%20carefully%20collected%20and%20hoarded&f=false), reputation is "a treasure to be carefully collected and hoarded", which you should guard with your life. In fact, it has always been so, e.g. outlawing someone was considered a pretty severe punishment in the past. I feel certain that many people who defaulted on their loans would prefer to keep their reputation intact (represented by their credit history in today's world) and rather have bank taken their property

The bottom line is that it remains to be seen what is more solid here. And personally, I'm strongly inclined to think that reputation would win. That's basically why banks don't need to have the rights on any tangible assets transferred to them as losing reputation through a default will have more devastating consequences. It can be said that bank loans in the form of a credit card are already collateralized by the borrower's reputation


You'd be surprised but I cited this article as early (https://bitcointalk.org/index.php?topic=1652815.msg17199620#msg17199620) as 2016. But that doesn't deny or defy the facts that a) banks have deposits, b) loans are typically collateralized, and c) those which are not may come straight from these deposits

Either way, in fact, any of these three ways, banks don't create money completely out of thin air

No, it can't. The borrower's reputation doesn't isn't a tangible asset. Collateral needs to be able to be sold to recuperate losses. A bank can't sell someone else's reputation. If someone launched a stable coin, and claimed it was backed up 1-to-1 with "reputation", they would be laughed off the forum.

So why have you changed your mind? You quote that article in 2016, and you seem to agree in that post that banks "don't need deposits" to create money. Yet now you seem to think that banks don't create money out of nothing, and all loans are collateralized, which is categorically not true.

You say that reputation is not worth anything (in terms of creditability), I say that it is, so let's just agree to disagree. A bank can't sell someone's reputation but it can definitely ruin it


I didn't in the least change my mind

And even in this very thread I repeat what I have been saying for years here, that banks don't need deposits to create new money. But that doesn't mean that banks create money as they see fit in a completely arbitrary fashion. They create money based on demand for money, i.e. through credit. But since most loans require collateral in one form or another, this newly created money is a collateralized form of money. I could even go as far as to say that reputation is also a form of collateral in this day and age (probably even a better one in certain respects)