Prices in the U.S. Are Rising at the Fastest Pace in Years | Officials at the central bank have embraced the possibility of higher interest rates to get resurgent inflation under control.

silence7@slrpnk.net · 2 days ago

Prices in the U.S. Are Rising at the Fastest Pace in Years | Officials at the central bank have embraced the possibility of higher interest rates to get resurgent inflation under control.

whosepoopisonmybuttocks@sh.itjust.works · 2 days ago

You’d think, intuitively, that it works this way but you’re missing the key concept: fractional reserve banking.

The bank doesn’t take $10 from a savings account, loan it out, and then get something like $11 back, thus creating $1 from somewhere.

What the bank actually does is takes $10 from a savings account then magically creates $90 and loans out $100, because somehow they’re allowed to do this. This is fractional reserve banking. They only actually have a fraction of what they loan out.

Banks create money by giving out loans. When loans are more expensive, fewer are given, less loan money is created and the amount of total money in circulation (and inflation) are reduced.

Or at least that’s what I’ve read.

Prices in the U.S. Are Rising at the Fastest Pace in Years | Officials at the central bank have embraced the possibility of higher interest rates to get resurgent inflation under control.

Prices in the U.S. Are Rising at the Fastest Pace in Years | Officials at the central bank have embraced the possibility of higher interest rates to get resurgent inflation under control.

nytimes.com