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To: Tommaso who wrote (98881)	1/3/2008 7:04:39 PM
From: GST	Respond to of 306849

<Modern fractional-reserve banking results in spendable deposits that originated as loans but which become part of the money supply as they move into demand deposits> It seems that there are surprisingly few people who understand that this is the basis for managing the supply of money in our economy. Oh well. I think that the biggest difficulty some people have is understanding the global context we are in and the financial consequences we face as a debtor nation. Oh well. The best defense is to be well-informed and act on it. I am trying -- I know that it is hard for this to be universal. In my view the markets are in perfect sync right now -- I see few if any contradictions. In time it will become obvious to all that inflation is just going to get worse as the US economy stalls -- but things are always easier to see after the fact. Oh well. Take care and good luck.

To: Tommaso who wrote (98881)	1/3/2008 8:19:26 PM
From: neolib	Read Replies (1) \| Respond to of 306849

A bank loan is not the same as a cash loan that I might make someone. In effect, banks have the legal right to kite checks. Any two private parties may agree to a transaction which also creates money, and there is little if any regulation of this form of money creation, other than market factors. One party writes an IOU, duly signed and all, and the other exchanges some goods or services. The IOU is money, although it might trade at a discount to face value, and is not as liquid as our paper money. Read any Nickel Adds or similar rag, and you'll see people advertising to buy such IOU's. There is clearly a market for them. Banks buy them as well. In fact, I'm a little surprised that something along the lines of Kiva has not sprung to directly facilitate the liquidity of populist money creation. Kind of like the people saying screw the banks and Wall Street, Fed included.