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Since our Money consists of interest-bearing debt - which few realise - then all else being equal, the money supply must increase more or less exponentially.

I'm not tracking here. I'm a farmer. I borrow money for my seed grain from the banker. This expands the money supply. I sell my produce to the banker. This also expands the money supply (because the banker can, as long as he has equity and meets reserve requirements, create money to cover his own debts - in fact, his debts are money). I repay the banker the loan plus interest. This contracts the money supply. The principal nets out by definition, and I can't see why the money destroyed in the interest payment can't equal the money created by the banker buying consumer goods (grain, in this case) on credit.

Even if it doesn't, for whatever reason, net out, the government can tax either of us and compensate the other so that money is, in the aggregate, neither created nor destroyed.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 22nd, 2009 at 11:39:39 AM EST
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