The Mechanics Of How Money Makes It Into Circulation

Most of us have learned about fractional reserve banking and how central bank base money is multiplied by banks through lending. The way money is mostly multiplied is actually through the re-use of collateral multiple times through financial institutions other than banks these days.

This hour-long interview of Dr Manmohan Singh by Caitlin Long on the Real Vision Finance channel run by Raoul Pal clarified one thing to me as a layperson: the system is so complicated and obscure that not even experts fully understand it.

This conversation and others on the Real Vision Finance channel also touch upon how the actual legal ownership of assets is a very, very complicated and nuanced matter.

What I also understood from that was that the legacy system is very inefficient from an information systems point of view. Part of the potential of blockchain technology and digital assets is the creation of tools for extremely rapid settlement allowing for the creation of a system that is less of a gigantic and complex house of cards built on massive leverage.

https://www.youtube.com/watch?v=UJsVYOfrc3M

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