When you transfer money from one bank to another, are they just moving virtual bits around? Is anything backing those transfers? What prevents banks from just fudging the bits and “creating” money?

Question

When you transfer money from one bank to another, are they just moving virtual bits around? Is anything backing those transfers? What prevents banks from just fudging the bits and “creating” money?

In: 1559

Answer 1

The South Park episode [Pinewood Derby](https://www.imdb.com/title/tt1397944/) is probably the simplest way anyone has ever been able to explain how money is simply a concept that we all just agree has value.