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

This reminds me – one of my friend’s parent is a MAGA nut job talking about having all of their cash converted into gold “when US goes digital like China.” I asked if he realizes when he uses an atm or debit card at a gas station there is not a little cubby-hole filled with his money and a little guy running back and forth taking his dollars and moving it to the cubbyhole filled with the gas station’s money.

This probably shows my age, but when I was in high school the accounting teacher said “someday all banking will be is computers transferring numbers back and forth.” Barring the currency backing up the numbers, this is basically how we live today.