You and I go to the bank and get two loans backed by the same reserve. We party and spend those new dollars which in part didn't exist before. Then we work to repay the bank and make the debt and credit columns agree in the books. Btw, the money of salaries we get could be borrowed too.
Another shot at it with a thought experiment. Everybody goes to the bank and borrows 10k every month. The bank never asks them back for the first five years. Result? Inflation, possibly hyperinflation. Same as if they would be printing money (and they'll won't get anything back when the five years are past.)
redblacktree|8 years ago
pmontra|8 years ago
Another shot at it with a thought experiment. Everybody goes to the bank and borrows 10k every month. The bank never asks them back for the first five years. Result? Inflation, possibly hyperinflation. Same as if they would be printing money (and they'll won't get anything back when the five years are past.)