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On the Responsibilities For "Creating" Money

Money is a medium of exchange. As such, it is utterly dependent on the honesty and goodwlll of whoever issues it. Historically, this has been the function of governments (federal or local). Such entitities have been subject to the myriad temptations that normally accrue to people in their particular roles.

Governments have, from time to time, delegated the rights of printing money to others. Many of these "others" include banks, who effectively create money by leading a multiple of their deposits to borrowers.

Subprime loans are but the most egregious example of how banks do not act in good faith when creating "money," which includes assets that are intended to be convertible as such. One of the requirements of money is that it is supposed to be convertible into its equivalent face value. But subprime loans with a nominal value of X, are, BY DEFINITION almost never worth this value X. Related problems exist for "derivative" issues such as CDS (credit default swaps) and CDOs (credit default obligations).