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Daily Reckoning: Why a Central Bank Can Never Run Out of Money
"To understand how modern money works, it may be best to start with the banking system. Wray began with a simple model of a bank, a firm and a household. “So a firm approaches a bank and says it would like a loan,” Wray says. “Where does the bank get the money?”
"It creates it out of thin air, out of nothing. It keystrokes it into existence. It creates a loan (an asset for the bank) and offsets it with a deposit (a liability for the bank). The firm gets a credit (an asset) and an offsetting debit (the loan). No prior deposits needed. As Wray says: “Loans create deposits. The bank lends its own IOUs. Can they run out?
"“Of course not. They can’t run out of their own IOUs.”
"This is important. If you don’t get this, banking will forever remain a mystery to you."
That's an extract from the article, an interview with Randall Wray that I have taken out of context. You can read the rest of the article at the above link. I only included that extract to stimulate your interest. Don't read into it something more sinister than what it is...a simple explanation of banking and the fractional reserve system.