<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>milderworkacc</author><text>&amp;gt; This is just completely wrong - banks only loan out money they have. If you go to a bank and get a loan the bank didn&amp;#x27;t just edit a database entry - they had that money. Banks loaning out money they don&amp;#x27;t have is extremely illegal.&lt;p&gt;I&amp;#x27;m afraid to say that &lt;i&gt;this&lt;/i&gt; is completely wrong. Commercial banks do in fact create money via lending! The 101 textbook explanation offered here is at best outdated and at worst misleadingly perpetuates a myth that simply must die.&lt;p&gt;The Bank of England&amp;#x27;s note on money creation in the modern economy [0] is the place to start - and more or less reflects the explanation in the article.&lt;p&gt;[0] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.bankofengland.co.uk&amp;#x2F;quarterly-bulletin&amp;#x2F;2014&amp;#x2F;q1&amp;#x2F;money-creation-in-the-modern-economy&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.bankofengland.co.uk&amp;#x2F;quarterly-bulletin&amp;#x2F;2014&amp;#x2F;q1&amp;#x2F;m...&lt;/a&gt;</text><parent_chain><item><author>cmeacham98</author><text>This article is bad, and contains several falsehoods, but the worst one is about fractional reserve banking:&lt;p&gt;&amp;gt; banks are able to issue out far more digital chips than they have in a state money ‘behind the counter’&lt;p&gt;&amp;gt; Imagine a person arriving a casino with no money but requesting chips nevertheless - this is pretty much what happens when someone approaches a bank and asks for a loan.&lt;p&gt;This is just completely wrong - banks only loan out money they have. If you go to a bank and get a loan the bank didn&amp;#x27;t just edit a database entry - they had that money. Banks loaning out money they don&amp;#x27;t have is extremely illegal.&lt;p&gt;The reason that banks &amp;quot;&amp;quot;create&amp;quot;&amp;quot; money is because when you loan money it &amp;quot;&amp;quot;duplicates&amp;quot;&amp;quot; it. You don&amp;#x27;t have to go through a bank to see this in action: Alice loans Bob $20 and then Bob goes and loans $20 to Charlie. The world now has $40 &amp;quot;more&amp;quot; in it, and remains that way until the loan is settled. Banks just do this process with your money and pay you interest for the privilege.&lt;p&gt;This is the reason that banks are sometimes required to keep some percentage of their money in reserve (and thus where the name fractional reserve banking comes from), because otherwise the same money could be loaned out forever and the maximum money supply would be infinite.&lt;p&gt;=======&lt;p&gt;EDIT: Because everybody seems to be ready to link the same Bank of England paper.&lt;p&gt;Yes, this is an simplified and slightly incorrect model of how it works in real life. In reality, this process is asynchronous: the government gives banks permission to loan out the money _now_ and figure out the backing cash later.&lt;p&gt;They don&amp;#x27;t have to keep track of who&amp;#x27;s money is loaned out to who as long as the balance sheet works out at the end of the day, and some percentage of assets are kept in liquid form (I believe it&amp;#x27;s something like 4%-5% in the US).&lt;p&gt;In the end, the point is the same: the government controls the creation of money, even if banks are the agents by which they do so.&lt;p&gt;The analogy the author has of a casino just going into debt by creating chips out of thin air is inaccurate and extremely misleading.&lt;p&gt;If everybody were to claim their chips, the casino would go bankrupt. If everybody were to simultaneously pay off their loans and withdraw their money from the banks, the banks would be fine (and have the interest payments they collected left over).</text></item></parent_chain></comment><story><title>The Casino-Chip Society</title><url>https://brettscott.substack.com/p/casino-chip-cashless-society</url></story>
<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>thewanderer1983</author><text>I don&amp;#x27;t mean to be rude. I really like Hacker news. It&amp;#x27;s a great place to get a wide range of interesting posts with a technology focus, and great talking points from people who have specialization within these areas. It reminds me of the early days of slashdot and even digg. However, it frequently falls short when it moves into areas outside of this. Especially when it&amp;#x27;s finance or fintech related fields. I think too many people here are well regarded in their tech field and think whatever thoughts they have on areas outside their lane is wisdom, even if they haven&amp;#x27;t spent much thinking of or gaining much knowledge in said field.</text><parent_chain><item><author>cmeacham98</author><text>This article is bad, and contains several falsehoods, but the worst one is about fractional reserve banking:&lt;p&gt;&amp;gt; banks are able to issue out far more digital chips than they have in a state money ‘behind the counter’&lt;p&gt;&amp;gt; Imagine a person arriving a casino with no money but requesting chips nevertheless - this is pretty much what happens when someone approaches a bank and asks for a loan.&lt;p&gt;This is just completely wrong - banks only loan out money they have. If you go to a bank and get a loan the bank didn&amp;#x27;t just edit a database entry - they had that money. Banks loaning out money they don&amp;#x27;t have is extremely illegal.&lt;p&gt;The reason that banks &amp;quot;&amp;quot;create&amp;quot;&amp;quot; money is because when you loan money it &amp;quot;&amp;quot;duplicates&amp;quot;&amp;quot; it. You don&amp;#x27;t have to go through a bank to see this in action: Alice loans Bob $20 and then Bob goes and loans $20 to Charlie. The world now has $40 &amp;quot;more&amp;quot; in it, and remains that way until the loan is settled. Banks just do this process with your money and pay you interest for the privilege.&lt;p&gt;This is the reason that banks are sometimes required to keep some percentage of their money in reserve (and thus where the name fractional reserve banking comes from), because otherwise the same money could be loaned out forever and the maximum money supply would be infinite.&lt;p&gt;=======&lt;p&gt;EDIT: Because everybody seems to be ready to link the same Bank of England paper.&lt;p&gt;Yes, this is an simplified and slightly incorrect model of how it works in real life. In reality, this process is asynchronous: the government gives banks permission to loan out the money _now_ and figure out the backing cash later.&lt;p&gt;They don&amp;#x27;t have to keep track of who&amp;#x27;s money is loaned out to who as long as the balance sheet works out at the end of the day, and some percentage of assets are kept in liquid form (I believe it&amp;#x27;s something like 4%-5% in the US).&lt;p&gt;In the end, the point is the same: the government controls the creation of money, even if banks are the agents by which they do so.&lt;p&gt;The analogy the author has of a casino just going into debt by creating chips out of thin air is inaccurate and extremely misleading.&lt;p&gt;If everybody were to claim their chips, the casino would go bankrupt. If everybody were to simultaneously pay off their loans and withdraw their money from the banks, the banks would be fine (and have the interest payments they collected left over).</text></item></parent_chain></comment><story><title>The Casino-Chip Society</title><url>https://brettscott.substack.com/p/casino-chip-cashless-society</url></story>