The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: GST who wrote (98852)	1/3/2008 6:10:39 PM
From: Tommaso	Read Replies (2) of 306849

I was just re-reading some of your analysis, and the comments on it, and I came to realize that there are some people who try to disagree with what you say simply because they cannot follow your reasoning. There are even some people reading what you say who misunderstand it so completely that they agree with their own misunderstanding, not with what you are actually saying. Modern fractional-reserve banking results in spendable deposits that originated as loans but which become part of the money supply as they move into demand deposits. A bank loan is not the same as a cash loan that I might make someone. In effect, banks have the legal right to kite checks. When the country was on a gold standard, there was an eventual, concrete, limit to the amount of money that could be created. This limit was not always a good thing; it resulted in periodic sudden contractions of credit. But it also restrained inflation. People who simply repeat mindlessly that money and credit are totally different things are living in an earlier century when there was in fact "specie," or gold coinage, into which paper bills and even checking accounts were supposed to be convertible on demand.

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