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example of (private) money creation under gold standard
#economics #money
Somebody borrows gold coins from a money lender. The gold coins still very much exist, but the money lender no longer owns those gold coins, what he owns is a promise by the borrower that the borrower will repay x gold coins at a future date (an asset). The borrower now has whatever he spent the coins on and a liability. The money lender's new asset and the borrower's liability are equal and opposite and have been created out of thin air.
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Mark Wadsworth: Glad to have cleared that up.
it, i.e. payment at a later date. The fact that the indebtedness is measured in terms of of how many gold coins will change hands in future is by the by. You can measure it in gold coins, pounds, dollars, payment in kind or bags of salt. b) <span>Somebody borrows gold coins from a money lender. The gold coins still very much exist, but the money lender no longer owns those gold coins, what he owns is a promise by the borrower that the borrower will repay x gold coins at a future date (an asset). The borrower now has whatever he spent the coins on and a liability. The money lender's new asset and the borrower's liability are equal and opposite and have been created out of thin air. c) The money lender himself accepts "deposits" which is a polite way of saying "borrows gold coins from people". The gold coins he accepts from depositors are of cour


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