Fwd: Re: on money (in the abstract)

[Richard Fiero]

Please see
http://en.wikipedia.org/wiki/Fractional_reserve_banking
For the normal way that money is created.
You go to the bank and borrow $100k. Someone does not come out from 
the vault with a wheelbarrow full of cash. There is probably not that 
much cash in the whole bank if the vault and all the tellers' drawers 
were emptied. There is a mark on somebody's hard drive that the bank 
has $10k in reserve and may make the $100k loan. A deposit at the 
bank is a liability that the bank owes to the depositor. A loan is an 
asset to the bank. You take your 100k loan and buy some stuff. Each 
recipient of your 100k total then deposits their piece at a bank and 
the collection of those banks as quickly as possible loans out 91k in 
total leaving 9k marks on some collection of hard drives. This goes 
on. The next round sees more deposits and more loans and so on. The 
Fed has only a couple of levers and they are maxed out at minimum 
interest. There really isn't any more that the Fed can do.

Paul Mackin wrote:
>. . .
>The central bank (or any bank) doesn't need a printing press to create
>money.
>
>Any more than it needs a furnace to destroy money, when there is too
>much of it out there.
>
>Even our most eminent economists use the phrase "print money" when
>referring  to what the Fed does.
>
>P