Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: russet who wrote (100746)	8/12/2009 6:15:42 PM
From: Claude Cormier	Read Replies (1) of 116555

I understand what you say, but I think the current money supply is not necessarily reduced. If, in this situation, the bank effectively calls in $3M in outstanding loans (which I doubt as fractional reserve banking would certainly allowed them to keep the loan on the books) it would be logical to assume that most of these loans would also be defaulted on and not reimbursed. Why would they call in loans on which the borrower is making is payment. It seems to me that there is only one way for the money supply to shrink, and it is for borrowers to reimburse their loans. Is this happening on a grand scale???

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