So let's see here, we make up a piece of paper with a number on it representing this piece of paper's pre-interest price that we've also made up and then we exchange that piece of paper for another piece of polymer with a number on it. I see, welp, guess you're right there Stevie, it didn't get pulled out of thin air, you made it up. Hate to be the bearer of bad debt but in the big scheme of things, no difference mate. Unless that bond paper says redeemable in physical gold or silver or some other equally valued commodity then it is nothing more than a virtually worthless piece of paper.The bank can't just pull that money out of thin air, so they raise that cash in a different market by selling a type of debt known as a bond, in exchange for cash from investors who have it to spare. The bank then turns around and gives the cash to the small business.
What the BoC is really doing is flooding Canada with new made up money which it sells to commercial banks for virtually notihing. Fractional reserve banking in turn allows that money to inflate to even more money reducing the purchasing price of the entire lot.
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