Debt, interest and velocity of money

Fractional Reserve lending people.

That is the 800 pds gorilla in the room that everyone ignores.

 

My experiment :

At the end of the first year I would reimburse $50 to the bank and pay $10 for the interest and ask a new loan of $160 ( bank now has $20 in reserve = $200; -$40 that I already have^^ ) and do it every year exponentially ^^

mouahahah

A symbiotic relationship with the bank making the payements higher and higher ^^ my banker gets exponential reserve everyone is happy

Rational, right ?

 

Let focus on the simple. In an economy with a 70% of GDP is consumer spending and there is no money velocity, no credit expansion what do you think we have? A deflation, currently, what was the Depression? Anyone? What's U6 unemployment at? 18% or if you believe shadow stats 22% What was the Great Depression unemployment? 22-23% last time I checked.

http://research.stlouisfed.org/fred2/series/M1V?cid=32242

 

Thanks for posting, its good to hear different points of view.

 

Here is the solution:

The customer takes his $100 and pays back $90 principal and $10 interest. So the bank made $10 off interest and can spend that money into the economy. Now the customer, a respected plumber, performs services for the bank worth $10. So the costumer can pay back the outstanding $10 of his loan. All balance sheets are now what they were before the loan.