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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (5606)	9/26/2002 1:00:54 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

There's no change in monetary aggregates from that example transaction I gave ... ... False This is the most significant aspect of economics you don't understand. Fractional reserve banking, the act of a banking entity lending the borrower money while at the same time maintaining the value of the money on deposit, creates an increase in monetary aggregates. This increase in monetary aggregates occurs even if the society in question uses only a fixed supply of gold coins as legal tender. By the same token, a reduction in lending reduces money supply. This situation occurred frequently in the Middle Ages as wealthy members of society saved an increasing percentage of the wealth in their city state. These hoards of coin, not lent out or invested, led to severe economic downturns. Frequently, an invasion would loot these stores which would lead to an increase in economic activity and wealth far greater than the total amount of coin hoarded. Approaching the study of money through simple arithmetic is grossly non-predictive of the actual results. Simple arithmetic only works when studying a single person's budget.