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: Skeeter Bug who wrote (233925)	12/22/2009 2:31:17 AM
From: GraceZ	Read Replies (1) of 306849

We don't agree and I haven't made your points. You are confused by the mechanism (where the Fed exchanges cash for the debt the banks hold to add to the money supply) and have lost sight of what it is that the additional money in the system actually represents. It is the economy of goods and services that grows (in this "interest" is represented by return on capital). The nominal value, as represented by monetary units, is an abstraction. The mechanism used to create addition monetary units to represent additional value in the economy is completely unimportant. What is important is that the growth in monetary units resembles the growth in the real economy somehow so that additional units don't make the existing units worth less.

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