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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: loantech who wrote (36293)7/19/2005 10:27:44 AM
From: philv  Read Replies (3) of 110194
 
A loan produced by the fractional banking system, when paid back should not affect the money supply, because it is taken back out of circulation when it is paid back.

However, because debt of all kinds has been steadily and parabolically rising through good times and bad for many years, with no hope of reduction or pay back, that is simply money printing. Debts that can't or won't be paid back is money printing. Furthermore, a debt that isn't paid should lead to bankruptcy.

That's my simple explanation. I am looking forward to some of the pros on this board to provide a better one.

As an aside, Greenspan argues that because assets have luckily inflated, the debt to equity and debt to GDP is not a concern. He goes on to opine that there is no asset (housing) bubble, and therefore, the asset's value is permanent and supports the level of debt.

So, there is no problem, no bubble, no trouble! <g>
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