ShackledNation
Libertarian
Apparently we were misreading each other lol. Well we know we agree on that point so cheers to that.You got it. I'm glad we agree on the conclusion now. The increase is $400. Your statement no money was created is false.Money supply is the $1000 in demand deposits.
If you assume the $100 was high-powered money created by the Fed, the maximum money supply created by that high-powered money is $100/0.1 (the 10% reserve requirement) or $1000. If the reserve requirement was 20%, as shown in the wiki article, total money supply would be $100/0.2 or $500.
If a graph is made showing the accumulation of deposits, one can see that the graph is curved and approaches a limit. This limit is the maximum amount of money that can be created with a given reserve rate. When the reserve rate is 20%, as in the example above, the maximum amount of total deposits that can be created is $500 and the maximum increase in the money supply is $400. <------from Wiki
Very good. But I don't think you realize what that means. There are $1000 in demand deposits...but only $100 in cash backing them. $900 worth of demand deposits were just created out of thin air when the loans were made.Your spreadsheet shows $1000 in deposits and $900 in loans.
I appreciate it when you make my point for me.
You got it. I'm glad we agree on the conclusion now.
I had it from the beginning, obviously.
Your statement no money was created is false.
LOL! That's funny! Where did you misread that as my claim?
There are $1000 in demand deposits..
Yes. $1000 in deposits, $900 in loans, $100 in reserves.
Not, as you claimed, $100 in deposits and $900 in loans.
but only $100 in cash backing them.
Absolutely!
Now that is just silly. When people say "out of thin air" that is exactly what is being referred to. Its just an idiom. The production is required to make the money, the bank just writes a number on a ledger and *poof* the new money is there, appearing "out of thin air". I'm not sure why you are even arguing such a semantic point.$900 worth of demand deposits were just created out of thin air when the loans were made.
Leave out the words "out of thin air".
$900 worth of demand deposits were just created when the loans were made.
Or......
$900 worth of loans were made when the demand deposits were created.