Gold vs. creating money “out of thin air”.GoldTVC:GOLDMR250000When a bank makes a loan it does not take pre-existing deposits and hand them to the borrower. It creates a new deposit by typing the credit into the borrower’s account on a database. That deposit is new “money” in the economy. The matching entry is the loan asset on the bank’s books. Both sides of the double-entry appear together; neither existed a moment earlier. Central banks and academic research have confirmed this for years: commercial banks create the majority of the broad money supply through lending. The Bank of England’s 2014 paper “Money Creation in the Modern Economy” is the clearest official statement of it. The phrase “out of thin air” is popular shorthand and captures the low marginal cost and the fact that no prior saving is required. Banks still claim it is not pure magic, however, some have expressed this is a form of witchcraft or black magic.