Where is the subject stored?

Where is digital money stored? and why not just "create" it?

• If i want to create a web site I will have to purchase a web hosting service. Basically a physical hard drive where information is stored and which will then be sent to other computers when the information is requested. Is that how it works with banks? The information about the money stored on a physical hard drive, and what happens if the then the hard drive is broken? If the data is backed up, can it not cause confusion as it will be the same money but stored in two different locations? Also, political implications aside, what stops lets say Iran, North Korea or any other rogue country with central government banks and no auditing agencies to "create" currency is USD in order to bulk up their foreign currency reserve?

• Answer:

  Let me split your question: Where's my money stored? At the end of the day you are right: your balance is physically stored on a harddrive on a server running in a big datacentre. The banks all have some sort of register where they keep a record of your balance and your transactions. Theoretically they might as well use a simple Excel spreadsheet for this (let me emphasize again: theoretically), but there are purpose-made softwares which are more powerful. Like, they have built-in monitoring functionality to keep records comprehensive, log employees' activity, are able to handle millions of accoounts, etc. What happens if this HD breaks down? Banks usually have "disaster plan" or "business continuity plan (BCP)" to cover such situations. They are pretty prepared for a HD breakdown to be honest. Servers are redundant, they store data redundantly, they can also persist data on geographically distant locations. They also routinely back-up their databases so they can roll-back to last save and rebuild client balances and transaction history if something fatal happens. Why don't rogue countries create fake dollars? Only FED can clear dollar-based transactions and they do it only for American banks. Therefore, all foreign banks (like a Russian, Chinese or Brazilian bank) have to have dollar accounts with an American bank at the end of the day if they want to transact in USD. /By the way, all currencies are cleared in the same fashion with their respective central bank./ Answering your question: Let's say there is a Chinese bank which has 1m USD balance with an American bank. Then the Chinese bank goes crazy and decides to flood the world with fake dollars. The bank might give tons of instructions to wire transfer dollar all around the world amounting to 1bn USD, but the American bank will execute these instructions only up to the Chinese bank's balance. All the rest will be refused. So, no fake dollars can be created  with wire-transfers. If the Chinese bank decides to print fake banknotes instead of wire transfers, that's another story, you do not have to be Chinese or part of the financial system to do this. Counterfeiting coins and banknotes has a long-long history, it is not a specific problem of the modern banking system. Countries occasionally do this, counterfeiting the enemy's currency was sometimes part of the warfare. Let me recommend this great movie below: http://www.imdb.com/title/tt0813547/ Based on true story, during WW2 the nazi Germany had a project to flood the Allies with counterfeited dollars and pounds. Ironically, they used jewish "craftsmen" selected in death camps. Rather dark movie, just like the age.