@SmithWillSuffice@climatejustice.social
I am reading through your GitHub publication by the way..
So I’d like to run this by you because I recently heard that up to 97% of the money supply is commercially created money (outstanding loan principals). That number seems to be incredibly high to me, but it was stated in the Forbes magazine article, on how banks create money.
Even so, the number I normally heard is that private credit is twice as large as the negative balance of the national government.
@SmithWillSuffice@climatejustice.social
The commercial money is transitory, but it’s general mass if I want to borrow a term from physics, suggest to me that there’s a lot of money supply that can only continue to exist for a combination of two reasons deficit spending and growth in the size outstanding loans.
This only slightly alters the dynamics, but there should be I think an entry for private money creation
@GhostOnTheHalfShell@masto.ai @SmithWillSuffice@climatejustice.social
The M2 money as a fraction of public debt is 0.6, so it's nowhere near 90+% commercial money.
https://fred.stlouisfed.org/graph/?g=1LeLA
@dlakelan@mastodon.sdf.org @SmithWillSuffice@climatejustice.social
Yeah, I said something poorly, but the idea from Forbes was to say that commercially generated money (bank loans) with something like 97% of all the existing money.. now mind you they didn’t specify money precisely.. (M whateva)
@GhostOnTheHalfShell@masto.ai @SmithWillSuffice@climatejustice.social
Right, but that can't even be close to true, M2 is only 60% of public debt. So that means probably there's a bunch of overseas dollars because it doesn't even exceed the public debt. for 90% of money to be commercially created, the M2/debt would have to be something like 9 or 10 not 0.6
@dlakelan@mastodon.sdf.org @SmithWillSuffice@climatejustice.social
Yeah, like I said, I my eyes sort of likes twitch when I saw that number and I said is this right?.. but your own points bring up an interesting question. Banks do create the principal amount and stuff it into the economy. The total outstanding amount is a function of the total outstanding principle left percolating in economy, or it should be.
.. so the other part would probably be purchased treasuries?
@GhostOnTheHalfShell@masto.ai @SmithWillSuffice@climatejustice.social
I just suspect the Forbes article is repeating something they heard from an economist who didn't have a clue? how could 9 out of 10 dollars come from banks and 1 out of 10 come from deficit spending, yet all money put together is 0.6 of public debt?
@dlakelan@mastodon.sdf.org @GhostOnTheHalfShell@masto.ai @SmithWillSuffice@climatejustice.social
GhostOnTheHalfShell
