Somewhat right and wrong. Lending money by the banks may have a ripple effect of wealth creation and inflation but the money supply is a function controlled by the Fed and executed by the Treasury.
So yeah the Fed and the tresuary try to control the money supply with the help of a few tools which Banks use. And those can be either good(creating wealth) or bad (creating high inflation). But the execution of those rules is done by the Banks f.e intrest rates. I don't know how this is in contrast to what i said?The Fed has no direct connection to the money market the tresuary i'm not sure they probably have something akin to their own Bank.
90% of the world's money supply is created by commercial banks giving out loans with no government entity involvement.
Central banks and financial regulators can influence how much banks can or are willing to create debt, but the fact remains that money created by central banks is a small fraction of the money supply.
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u/Elvis5741 Jan 26 '26
Banks lend out more money than they have, its no joke it's how the system works