Re:Soaring Student Debt Prompts Calls for Relief
by dpark on Wednesday September 14, 2016 @07:02PM
(#12501957)
Right. And the instant the vendor cashes your check, it's no longer available as a deposit at your bank, so the bank can't use it for lending. The point at which your loan "enters the economy" is the same point at which the bank can no longer use it for fractional lending. And in all cases, the amount that enters the economy is less than the amount that was originally deposited.
There is no scenario in which you depositing a dollar in the bank "results in more money being spent, not less" in comparison with you spending a dollar. It quite obviously cannot be the case, because a spent dollar is economic activity of its own plus whatever economic activity occurs as the result of depositing the dollar, because the spent dollar is most certainly on its way to the bank as well.
If I borrow money from the bank, they simply list it as a credit to my checking account. I can then write checks to buy things. The vendor deposits my checks in his checking account. The money never left the bank, but it still resulted in commerce - for all intents and purposes, it "entered the economy".