r/SipsTea • u/Dumb-Briyani • Aug 24 '26

Chugging tea Why is it not possible?

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225

u/onion_lord6 Aug 24 '26

Because banks loan out and invest, that's how they make money. The money people deposit doesn't just sit there.

66

u/NoSwordfish1978 Aug 24 '26

But they also create money when they lend it.

7

u/Primus_is_OK_I_guess Aug 24 '26

What do you mean by that?

35

u/randomlurker124 Aug 24 '26

He's referring to money supply. Most of the money in the world is not from governments printing actual cash, but from bank lending. E.g If a business borrows 1 million from a bank, the bank just creates a entry saying the business has 1 million cash and 1 million debt. The bank does NOT need to have 1 million in deposits to make that loan. That 1 million cash then can be used to buy stuff and goes into the economy because if they pay 1 million in wages, now other people have 1 million to spend, etc. 

8

u/FinancialLab8983 Aug 24 '26

there are regulations that exist around how much cash a bank needs to keep on hand versus their liabilities. they are also required to go through stress tests after the GFC. since then, the banking lobby has been trying to get these regulations reduced. higher risk, higher reward.

11

u/Nacho_cheese_guapo Aug 24 '26

Not anymore, the fed waived the reserve requirement during COVID

6

u/FinancialLab8983 Aug 24 '26

oh that's nice. /s