Akvod on 08 May 2010
| SamuelRSmith said: And, yes, I forgot, deficit spending, indeed, all debt spending, requires an increase in the money supply to actually happen. The Federal Reserve isn't the only body in the USA which can create money, you know. Every single bank in the USA has the ability to create money. When you take out a loan of, say, $20,000 the bank will "create" a large chunk of that money. The difference is that when you take out your loan, or a mortgage for $200,000 the amount of money created is infinitesimal, especially when compared to the amount of money created to fund the trillions required for the Government's debt. |
The bank can only "create" money by lending out money from its bank reserves, thus increasing the money supply. It gets those money from the Fed. They don't have a damn printing machine, all they can do, is hold onto the real cash they have, and loan it out, which will be spent, saved, loaned out, on and on.
In short, the banks cannot increase the money BASE, only the money supply, and they only hold onto money for the sake of finding the best loan, not because they have an interest in monetary policy...
You're so fucking confusing me.
