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: GraceZ who wrote (233898)	12/21/2009 5:21:48 PM
From: Skeeter Bug	Read Replies (1) of 306849

>>Interest on the loan can be paid back with savings from production.<< production doesn't create money, so it can't be done that way. if i produce something, i sell it to someone who pays me with money already created. >>It is easy to see what I mean by this by taking money out of the equation altogether and going back to the pre-monetary economy. Imagine you and I are both farmers. We both grow corn. My corn is "in" and yours has yet to yield. I lend you ten ears, tell you to pay me back 11 when your corn comes in. That 11th ear is simply savings from your production. That 11th ear didn't come into being via debt creation, it came into being from your productive efforts, it was created "out of thin air" just as people are always accusing the Fed of doing.<< i don't think your analogy fits. the process that one uses to create marginal money is quite different than a marginal ear of corn. >>We could ratchet up the number of ears we produce (and consequently save if we don't eat them all) every single year without ever creating a single debt between us.<< that works with corn, but it doesn't work with money.

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