Comment by joosters | Hacker News Reader

Comment by joosters | Hacker News Reader

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Here's a better way of explaining this:

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.

This is the best explanation. What I think a lot of the public doesn't realize is where the money comes from when you walk into a bank and you get a loan from that bank (instead of depositing the money from somewhere else).

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.

You are right. A bank loan is the borrower's liability and the bank's asset but the deposit resulting from the loan is bank's liability and the owner's asset. This is how most bank deposits come into existence. If all loans were paid off and no new loans were created, there would be a tiny bit of money left.

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