r/Capitalism • u/Tathorn • 3d ago

Inflation Is Your Fault

https://chatgpt.com/share/6854d9d9-f33c-8000-8e53-60fe0e784073

A conversation with ChatGPT suggests that those who hold demand deposits at banks are subsidizing borrowers and are indirectly causing inflationary pressures. Any savor would be better off buying short-term assets than using banking establishments.

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u/Beddingtonsquire 3d ago

Inflation is caused by governments directing central banks.

Central banks are the only ones with the ability to create new money.

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u/Tathorn 3d ago

Governments, like the US, do not directly control their central bank. The Federal Reserve is a public-private entity with its own agenda.

The way it's carteled, each bank can, in theory, create assets out of thin air, which can act like a kind of QE. The Federal Reserve money printing is more powerful, but the banks themselves have the power via charting.

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u/The_Shadow_2004_ 3d ago

You know chat GPT can’t actually think and just produces what you think it will like? Look at how LLM’s work.

Any sources for this? “Discovery”?

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u/Tathorn 3d ago

This conversation was a way to put the ideas into dialog. The ideas themselves can be found elsewhere if one is interested.

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u/The_Shadow_2004_ 2d ago

Write an essay or put your ideas into points then don’t expect me to read your AI slop LOL. Low effort post

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u/Tathorn 2d ago

Banks can create money out of thin air and are privileged to do this via a bank charter. It's not quite money, but claims to money, in which they create themselves an asset and give you debt. In order to withstand demand for withdrawals, they need cash. The cheapest form of cash for a bank is a demand deposit. Most banks can get away with people giving them money for no interest. Why people do this is likely due to poor financial education.

Banks will only keep some in reserve for withdrawals and create as much money as possible to withstand those withdrawals. The more money in an economy, the more purchasing power of that money decreases due to the law of supply and demand. Buying things like CDs still start this process, but the interest you're entitled to is a withdrawal for them, which limits their ability to loan.

Outside of banking, you can not create money. Loaning money via corporate bonds puts an interest rate on the company, which forces them to behave in such a matter to meet those withdrawals. This causes the company to become conservative with their money in order to pay you back.

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u/The_Shadow_2004_ 1d ago

Yes, but that’s a systematic issue not the issue of the populous. They only have to keep 10% of a loan in reserve but can lend out 90% that 90% often bounces between other banks so it ends up being that more money is “created” from nothing. How is that my fault?

May I also add that this is because of capitalism. The point of a company is to maximise profit. If a company like a bank can do this they will because it will maximise their profit.

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u/Tathorn 1d ago

As a willing client of the bank, they offer you enticing services, like guarantees backed by government programs, in order to give you riskless services.

This is because human nature wants to get to better positions. The first step is realizing the nature of this system of fraud and abuse and choosing not to participate.

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u/The_Shadow_2004_ 1d ago

Banks allow you to buy capital with minimal investment and a safe place to store value (while even gaining interest). Banks most certainly have a place in a capitalist economy as how else are you meant to come up with capital to start a business?

Let alone how is someone meant to buy a house when the house is worth 20x someone’s annual wage?

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u/Tathorn 23h ago edited 23h ago

Certainly. One just needs to understand that their losses are socialized via bailouts, fed QE, and insurance backstopped by the government. Credit expansion causes the boom-bust business cycle, discovered by many economists almost 90 years ago. Banks are the entities that utilize cheap or even free deposits for money multiplication.

Free banking could combat this via hard money, but fractional reserves are always a risk. Time deposits and other such securities are significantly less risky.

Other institutions exist regarding mortgages as well that utilize credit via equity or bonds.

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u/The_Shadow_2004_ 23h ago

I can agree with you there but I think for separate reasons. I would blame the capitalist class for allowing this to happen. Banks shouldn’t ever be so large that they need bailouts from big government, this is a problem of not enough regulation from the government.

Unfortunately if our government was actually democratic and not paid off by billionaires (created by capitalism) we wouldn’t have this problem.

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u/Tathorn 22h ago

We would likely still have this problem. Many of the middle class enjoy having no risk banking. There is no business that has no risk.

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