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Economics lesson 85: Is it counterfeiting when government-licensed banks create money out of nothing 🤨🤔

Hello and welcome back to my school essays! Todays topic is also very fun and I’m excited to provide my POV and an in general explanation about it!

The topic of whether it is counterfeiting when government-licensed banks create money out of nothing is a complex and controversial issue. On one hand, some argue that this practice is essentially creating counterfeit money, as the money is not backed by a tangible asset such as gold or silver. On the other hand, proponents of this practice argue that it is not counterfeiting, as the government has granted these banks the legal authority to create money.

In order to understand this issue, it is important to first understand how money is created in the modern economy. When a bank makes a loan, it is essentially creating new money out of thin air. This is because banks are only required to hold a fraction of the deposits they receive as reserves, meaning that they can lend out the rest. This process is known as fractional reserve banking.

Critics of fractional reserve banking argue that it creates an unstable monetary system, as it allows banks to create more money than there is actually backing for. They argue that this can lead to inflation and financial instability. However, proponents of the system argue that it allows for greater economic growth and that the government has put in place regulations to ensure that the system is stable.

Ultimately, whether or not government-licensed banks creating money out of nothing constitutes counterfeiting is a matter of interpretation. While some may argue that it is counterfeiting, others believe that it is a necessary and legal practice that supports the functioning of the modern economy.

*I personally think if the government who’s intentions are for making the economy to prosper for the better for generations to come and is also licensed to do so, then I think it’s not necessarily counterfeiting since they aren’t stealing, but providing for us. If the workers there use the printed money for reasons other than providing, for reasons that aren’t for others but personally for themselves and aren’t licensed to do so- then there’s a problem and that’s considered counterfeiting aka stealing money.*

Thanks for reading this essay! I hope you enjoyed my POV or parts of the general explanation or learned something new! I’ll be posting more soon and have a blessed rest of your day!
Good News Store!!!


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