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@deezthugs@liberdon.com
Thats not actually true. Some loans create new money, others do not. We have a fractional reserve system and a certain percentage of new money can be used for loans. While the loan is active it represents new money yes and once the loan is paid back it represents that money being destroyed (until it can be loaned out again).. But once its paid back it is paid back with interest. At this point the extra money it has is old money and not part of the base reserve. As such when it is loaned out it isnt creating new money anymore.
The reaon for this is that a normal loan is not in itself money creation because the asset the loan gives is combined with a debt that goes with the loan. So the persons net equity (the amount of actual cash in the economy that is theirs) is 0. The reason it creates new money on up to the reserve rate in a fractional system is because they are allowed to loan out a portion if the new money they go without the bank owing any debt on that money.. so it multiplies it because the excess reserve (amount over required minimum in a fractional system) is free to the bank to use
