CountryWriter, if you read what I have written you will see I am NOT arguing banks create money from thin air!
Banks create customer *deposits* - which are liabilities, cash they owe to people, so banks can create unlimited liabilities for themselves - but who would do that?!
What banks can't create in unlimited quantities is assets - income-earning debt like mortgages and business loans. Actually, many banks try to, by exploiting weak accounting standards to assign dodgy valuations to their non-performing loans to low- and no-doc borrowers for example.
You have created a straw-man argument and are busy knocking it down. Your criticisms do not apply to what I am saying, which is based on what I've learnt from Prof Fekete and Alasdair Macleod amongst others.
BTW CountryWriter, just as the GFC was starting you didn't think the big US banks were insolvent. Actually turns out they were and it is only US Treasury cash, Fed QE and dodgy mark-to-fantasy accounting standards that keep the zombie banks "alive".
