Posted: Mar 30, 2013 7:19 am
Regarding banks creating "new money", I stand by what I said. Fractional reserve lending is not "new money", as it is accounted for. It doesn't cost anything and it doesn't add to inflation (that I know of). "new money" is what the central banks create when they buy government bonds or print money.
epete it adds to the money supply = that's the main goal is to match money supply with demand/growth and it works if it's coralled into that zone.
If lending is too loose and based on false valuations then it is inflationary tho not in the way that printing new money is.
Modern Banking and the Fractional Reserve System
[Figures and illustrations were current when written in 2002.]
Do you know where the bank gets the $160,000 for your mortgage? It’s very simple. Someone walks over to a computer and types 160,000 beside your name. With only $27.93 of cash reserves for every $10,000 of assets (in Canada as of June 1999) the bank has just created the remaining $159,553 of that interest-earning money out of thin air. When, after 25 years of hard work, you pay off your mortgage, the $159,553 vanishes back into thin air.
Not so the interest however. It vanishes into the banker’s pocket. Chartered (i.e. privately owned) banks, such as The Bank of Montreal, The Royal Bank, The CIBC, etc. have created about 95 percent of our total money supply ($589.1 billion as of Sept 1999) in exactly this way. But the cash reserves in their vaults amount to only a paltry $3.893 billion.
http://www.birdsinbackyards.net/species ... -vieilloti
It's polemic but generally accurate.