MyFavDinoIsDrinker t1_j2ebxe2 wrote
Reply to comment by Ansuz07 in ELI5: If money today is all digital, why can't all the countries governments just go on the computer and add like five more zero's to their account and fix everything? Same principal is 100 years ago too I guess, why not just print more cash? by ss89898
That's not entirely accurate. Technically speaking, the US government doesn't create money at all.
What happens is the Federal Reserve adjusts the base lending rate, which adjusts how quickly banks are giving out loans. And every time a bank gives out a loan, it is effectively creating new money since it also holds on to the original money that loan was based on.
It is called "fractional reserve banking" and it is how almost all countries do it. Very few countries actually create money anymore.
Ansuz07 t1_j2ecbu5 wrote
While this is true, they used a different technique during the financial crisis.
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