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To: Moominoid who wrote (11805)	12/12/2001 11:10:17 PM
From: LLCF	Read Replies (1) \| Respond to of 74559

<The whole point is that if every bank only lent out what it got in and there was no reserve requirement then in theory the money supply would accelerate out of control..... > How could that happen?? In my example the bank can only lend out deposits and it's capital [one time]... the way it works today is that depending on the defenition of capital [one of the tiers can even be borrowed I believe] the bank can lend out many times it's capital... THAT's how money supply accelerates no? "To the extent that banks lend their own savings, or mobilize the savings of others, their activities are productive and unexceptionable. Even in our current commercial banking system, if I buy a $10,000 CD ("certificate of deposit") redeemable in six months, earning a certain fixed interest return, I am taking my savings and lending it to a bank, which in turn lends it out at a higher interest rate, the differential being the bank's earnings for the function of channeling savings into the hands of credit-worthy or productive borrowers. There is no problem with this process. " -Murray N. Rothbard DAK