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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (72715)	12/23/2007 8:11:13 PM
From: Tommaso	Read Replies (2) \| Respond to of 116555

As long as the bank balances exist that were created in making the loans, and as long as demand deposits exist covered by the loans, the money exists. Until the loans are paid off or written off in default, they behave as money. It's been that way since the first goldsmiths issued notes in excess of the gold they actually had in their safes. There was not enough gold to cover the outstanding notes. The concept of money as an absolute store of value, rather than as its function as a convenient medium of exchange, can confuse thinking. In a poker game, players buy chips that are convertible at the end of the game into money. The player acting as banker customarily requires full cash payment for chips. Nowadays, chips are being issued with no payment, to keep the game going. Having no intrinsic value, not redeemable in anything more concrete, they are doomed to lose value. They cannot be cashed in. This is inflation. Deflation in these conditions is impossible.