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plungesponge · 41-45, M
It used to be a representation of value, to overcome the limits of barter. But since fiat currency and fractional reserve banking, each dollar is just an IOU created out of thin air by leveraging a tiny amount actual money, which is then leveraged again hundreds and thousands of times until the poor sucker citizens who get the dollar last find out it can only buy a fraction of what it could before
in10RjFox · M
@plungesponge well observed.. but ideally how should it be ?
plungesponge · 41-45, M
in10RjFox · M
@plungesponge if an IOU, who owes who ?
plungesponge · 41-45, M
When money was a representation of an actual asset, the IOU was the bank saying they owed you money, since you could take that IOU back to the bank and get back your gold.
Nowadays it's the other way around. Central banks create an IOU with nothing backing it, which regular banks have to pay back with interest. They loan their pile of IOUs to the public, who have to pay it back with interest.
There's a very thoughtful explanation of it in this video
[youtube=https://m.youtube.com/watch?v=mII9NZ8MMVM&t=1517s]
Nowadays it's the other way around. Central banks create an IOU with nothing backing it, which regular banks have to pay back with interest. They loan their pile of IOUs to the public, who have to pay it back with interest.
There's a very thoughtful explanation of it in this video
[youtube=https://m.youtube.com/watch?v=mII9NZ8MMVM&t=1517s]