Food for thought: A bank creates money out of nothing, or 10 times its deposits. Once that money is lent out, say $10,000, and is subsequently repaid, the effect is neutral at that point. If it is not repaid, defaulted upon, the original money is still out there in the economy somewhere. Regardless if the borrower had purchased an asset or a service. The asset may have gone to zero value, but the seller of the asset now has the money. If it has gone into services, other people are now in possession of that $10,000.
Once created out of nothing, money remains in circulation unless its withdrawn back from whence it came, the bank. Debt as always gone up, and the supply of money mirrors that.
Its not easy to destroy money other than to burn it. Assets may fall, but the money once created still circulates. Payments back to the bank takes money out of circulation, but for ever dollar repaid, the bank now has the ability to lend out ten times. If the bank doesn't lend, and money is paid back, then money supply can't increase. If the bank quits lending, it too goes broke eventually.
That is I believe what Claude has been saying, and he's not nuts. |
