Fwd: Re: on money (in the abstract)

[Paul Mackin]

On 11/21/2011 3:34 PM, Richard Fiero wrote:
> 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.

What about more quantitative easing?

P
>
> 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
>
>