by Some people think that because banks create fiat money out of thin air it is not real money, and they might call it funny money, but what is money?Money is work done or the promise to do work, i.e, you can buy a product that someone made (work done), or get someone to do work for you.So, do banks create money out of thin air? What they do is get you to sign a contract that you will promise to do the work necessary to pay money back, in other words, the borrower creates the money by doing work, often over many months, or years. So we could say the borrower gives the fiat money value as he works to pay the loan off.So you get a loan for ,000 and the bank credits your account by putting in the number 10,000 and it appears that the money came out of thin air, as libertarians believe. But
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Money is work done or the promise to do work, i.e, you can buy a product that someone made (work done), or get someone to do work for you.
So, do banks create money out of thin air? What they do is get you to sign a contract that you will promise to do the work necessary to pay money back, in other words, the borrower creates the money by doing work, often over many months, or years. So we could say the borrower gives the fiat money value as he works to pay the loan off.
So you get a loan for $10,000 and the bank credits your account by putting in the number 10,000 and it appears that the money came out of thin air, as libertarians believe. But let's say now that the borrower does two hours overtime a night to pay off the loan and it takes him two years to do it, and as he pays his loan off the amount be owes goes down and the 10,000 figure slowly gets reduced to zero.
So you can see that the borrower created the money by doing work. The fiat system - where the money is created up front - is a brilliant system for facilitating this money equals work process where people can do the work after they have got the fiat money as a loan (where this loan is the promise to do work that will be done in the future), and as they work to pay off the loan the money is given its real value. The work they do is the money.
Fiat money smooths everything out so you don't have to make what it is you need yourself - so you can work in accounting instead, or whatever. Fiat money makes it easy for us do work for each other. By getting the fiat money upfront as a loan, we then have to do the work to pay off the loan. So, money = the work we do.
So you can see that fiat money is real money.