- May 7, 2010
- Reaction score
- Upstate SC
- Political Leaning
actually tons and tons is created over time to keep up with an always growing GDP!!!
It's the same money circulating over and over.
So let's say that I have a dollar, and I pay you for a product, and then you have a dollar and you pay John for a product and he now has a dollar, and then he pays me for a product and I have my dollar back. At no time was there more than one dollar in circulation, yet that one dollar satisfied several trades. For the purposes of M2 and up, when banks loan money and get deposits from the proceeds of the loans, that is the same as money circulating (people ain't getting the loans for nothing - they are spending that money), and the bank is counting the deposits over and over again, ignoring the fact that there is an offseting liability created by each loan/deposit combo.
Banks aren't really creating money, they are creating more debts and deposits.