Re: The forgot a basic rule of banking
That is a little simplistic about how money is created. Most is created by banks, not by the federal reserve or central banks. When they create a loan they do not shuffle money from somewhere else into your account, they just update the numbers for your account and their loanbook. The money didn't exist anywhere before and now it does. The bank has to maintain a fractional reserve of what they loan out. When the principal is paid back the money is destroyed, it is not shuffled somewhere else. This is not to say that the money is made up, the rules of reserve and asset backing limit the amount of loans a bank can create. It'l just a illustration of the difference between money and value - assets have value but that doesn't mean that value is in the money supply.
Physical cash is created and shuffled around. That makes up a very small % of money used by society, something like 2%.
Biting the hand that feeds IT
