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Politics : Politics for Pros- moderated

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To: Nadine Carroll who wrote (72229)	9/21/2004 3:49:29 AM
From: Ilaine	of 793843

>>The Government and the Fed create more at will. No, the Federal Reserve can only loan money, not create it. It's backed by the promises of the borrowers to repay - including interest. And the only thing the Fed can loan is M1 (part of M1 at that). The rest of it is "created" by financial institutions doing what they've done for centuries, maybe even thousands of years (really it's not clear), loaning money at fractional reserve. It has never been the case in recorded history (OUR recorded history) that money was not loaned at a fraction of bank reserves (around 30-40%). That's part of the genius of capitalism. And it only works because our system is reliable enough for people to trust it.

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