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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Tommaso who wrote (98881)1/3/2008 8:19:26 PM
From: neolibRead Replies (1) of 306849
 
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.

Any two private parties may agree to a transaction which also creates money, and there is little if any regulation of this form of money creation, other than market factors. One party writes an IOU, duly signed and all, and the other exchanges some goods or services. The IOU is money, although it might trade at a discount to face value, and is not as liquid as our paper money. Read any Nickel Adds or similar rag, and you'll see people advertising to buy such IOU's. There is clearly a market for them. Banks buy them as well.

In fact, I'm a little surprised that something along the lines of Kiva has not sprung to directly facilitate the liquidity of populist money creation. Kind of like the people saying screw the banks and Wall Street, Fed included.
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