Quote:
Originally Posted by JCricket
anyone here see a little pseudo infomercial movie clip called
"Money as Debt"
A kind of intersting tidbit on how he US economy actually grows and gets bigger - more specifically, how do dollars keep getting into the system.
I won'ttry to quote too much, cause I'll prolly get it wrong, but if you go the bank and borrow $10k, you just increased the us economy like $90k - crazy huh?
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It is called the multiplication effect if I am remembering my macroeconomic course I took back in 1982 correctly. The federal government and private banks create money by lending.
The bank sees the outstanding loan as an asset, and of course the borrower ( a small business or consumer) has the money in hand. The Federal Reserve sets the rate it lets banks borrow at and that in turn is how a bank sets it interest rates (for mortgages etc). So if I give you a loan for $10 dollars you have the money and I have the outstanding loan on my books...an asset to me of $10 dollars then we have created $20.
That is how our great consumer economy works and why we are such a great economic power. People wanting to destroy the Fed, stop government spending, end consumer credit....just do not get it. In third world countries this does not happen, and is why many simply cannot own their own homes or cars.