Of course, the problem is
Of course, the problem is that anyone can whistle an IOU out of thin air,a nd that IOU can circulate. I could write one today, and it would be accepted as long as the people it was passed around reasonably believed that if they presented it to me, I would honour it. I wouldn't even have to have the money on my person, as long as I had a reasonable expectation that I would soon have the funds to be able to honour it (or could find them at a pinch).The great story of fractional reserve banking works just as well for a shoe shop as it does for a bank: if the shop sells on credit, you can play the same story through (so does that mean shoe shops create money?).Varoufakis does state that banks create loans out of thin auir, but suggests they are 'borrowing from the future' i.e. based on the assumption of actual production. That does pick up the key point, banks don't create wealth, and one way or another their loans need to be covered by wealth from somewhere else, either through savers or through repayments.