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RE: Bounty 10 Steem: Who creates the fiat money
This part in particular explains how banks create new currency with the reserve requirements. However if they just create the out of thin air, why is a problem from them if loans default?
To my understanding, the defaults hurt the banks because the consumer income is what holds up the derivative bets they make. The Big Short talks about this with the mortgage bonds that banks invest in with their “new money.”