Hacker News Reader

> Where does the extra money for the loans come from? Banks can't create it out of thin air, it has to come from somewhere

To a large extent, banks do create money out of thin air when they give out a loan. See also, https://en.m.wikipedia.org/wiki/Money_creation#Credit_theory...

View on HN

Don’t banks have a certain reserve ratio that they need to maintain? This would mean the absolute maximum they can give out in loans is a fixed amount, and likely slow changing. Assuming loans make money and banks want to maximize profit, banks would loan out close to the max they can (of course they need to keep margin to address any risks). This would mean giving more loans to certain group of people would put downward pressure on the amount of loans banks can give to others.

Reply on news.ycombinator.com