It's just that, to a huge organisation, a $14 million accountancy error could go unnoticed for a long time. Likewise, a dollar or two missing from my piggy bank will probably not be noticed. Merely a question of scale, but the loss is still there.
Banks can't do that right now anyway. Banks only hold onto cash to meet reserve requirements, which is a fraction of the deposits held for depositors. If everyone tried in a bank to withdraw cash, you'd have a run.
Please explain this.
Almost all significant transactions are electronic now. Nobody withdraws millions of dollars in physical currency.
You're just modifying rows in a database.
All the bank would do is tell the other bank that they have the money now and debit a database row which was fake to begin with?
I'd suggest that the hackers who manage to alter their balance are exceedingly likely to be the kind of people to try and obtain a physical withdrawal of their wealth!
But even in electronic form, there is some settlement going on behind the scenes. Let's say I hack my bank and give myself $100 billion dollars, then try and transfer this to another bank in a country with a suitable lack of extradition treaties. No receiving bank is going to blindly accept a transfer in of $100 billion. Do you think they just take the other bank's word for it, that they are good for the money?
Let's say I frequently lend cash to a wide circle of friends, and they lend cash to me too. Because my memory is bad, I have to keep track of things by writing down the debts on a piece of paper, e.g. "Bob owes me $5, I owe Kathy $10" and so on.
In effect, what these hackers have done is to steal my piece of paper while I'm not looking and scribble "I owe Mr hax0r $10" on the bottom of it.
Now, who have they stolen from? Me, of course! I will blindly pay them out $10 should they ask for it. Has Bob lost money? No. Has Kathy lost money? No. Has money magically been created and cost everyone in the world fractions of a cent? No. I am the person who has lost out.
If they stole huge amounts of money from me such that I couldn't make good on my debts to other people, then others will be indirectly affected too. But I am the person who was robbed.
They basically are just creating new rows in their databases. Just like the names-on-paper example above, someone just types "+$X,000" into the row that represents the money in your account. And then someone types the equivalent of "adastra owes us $X,000" into a row in another database for their balance sheet. It really is money created out of thin air.
But then I suppose all money is actually IOU's created out of thin air... It's just that for some reason people think it's only the federal government that can create new IOU's.
1) Bank A will decrement your [fake] balance; 2) Bank B will increment that account's balance; 3) Bank A will note that they owe 1 million to bank B, and Bank B will not that they deserve 1 million from bank A. They'll settle that balance somehow (that's a bit complex and irrelevant), but the debt now exists. If they don't trust each other that much, then bank B will credit the funds only after bank A has paid them; this often causes a couple days delay in international bank transfers.
Do you now see how they can't "create money" by whatever they do in their databases? To give cash out, banks need cash; to send money somewhere else, they need to give money to that somewhere else or convince that 'somewhere else' to lend them that money.
In essence, altering an account balance is exactly equivalent to faking a document stating "Bank owes me X dollars" so well that the bank (temporarily) believes it - nothing more.
In any case, if you fake a dollar in Bank A systems, then no matter where and how you withdraw or transfer it, it's a dollar that Bank A loses.
Well, no, that's extremely relevant. How is that debt settled?
I'm quite certain they don't send over a truck full of cash.
If it's just a matter of Bank A telling Bank B to adjust their books and Bank B taking their word for it, then Bank A isn't losing anything. They just created that money out of thin air.
Is there any difference if I later settle this by giving you cash, write a check, pay with paypal or give you a gold piece? The debt is real, if I gave a binding certificate "I'll owe $100 to you" then I just lost $100.
Bank A isn't simply "telling Bank B to adjust their books", Bank A is telling "please adjust your books to give $X to Y, and for that I'll pay you that amount via method Z", where Z typically is either a clearing house (someone who aggregates the payments and settles the net differences of all the bazillion payments) or a mutual correspondent account. Until they settle, they have a valid, legally binding debt to Bank B.
Trucks full of cash may be involved in settlement, but usually are not since they are very inconvenient and expensive - but if Bank A holds their reserves at a central bank and thus has the right to request it to ship 123 truckloads of cash; then it may transfer part of these reserves to Bank B, so that Bank B will get one of them and Bank A will only be able to request 122 truckloads of cash. Of course, the truckloads of cash are used only as much as needed (say, to fill up ATM's) - but they are real, you can close up your bank, settle all debts, and take all remaining assets out in cash.