Short squeeze party thread, page-337

Commercial banks are only creating more debt based on fractional reserve, not more money. Money <> Debt. Our monetary system is a debt based system where total money in circulation - debt = 0.

Say RBA creates 1 million dollars (which it can) and lend it out to CBA. Total debt at this point is still 1mn.

Borrower A spends 1mn buying an investment property. The seller collects the money at settlement and parks it in a FD with CBA. Total debt at this point is 2mn. Borrower A owes 1mn to CBA. CBA owes 1mn to seller. The total amount of "money" in circulation is also 2mn.

CBA keeps 10% of the 1mn deposited money as capital reserve, and lends the 900k out to borrower B. Total "money" in circulation is theoretically 2.9mn, but the debt has also increased to 2.9mn.

So theoretically, the commercial banks did create the amount of money in circulation, but this is not done by them creating actual money (which they do not have the power or authority to do). They can only create more debt in the system.

Anyway, this is venturing well beyond the purpose of this thread and board. I am sure there is a far more appropriate forum for discussion about monetary system etc

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