China lets yuan break 7-per-dollar level for first time in over a decade

Re:China lets yuan break 7-per-dollar level for first time i... by kgwgk on Monday August 05, 2019 @01:43PM (#20616286)

I’m sorry, it seems I misread what you wrote. That doesn’t contradict what I wrote.

Yes, if the money created is in the end kept in the system as a deposit it enables new loans (but it is not necessarily so if the money goes to someone that uses it to cancel a loan of their own, for example).

And due to the fractional reserve requirement the quantity of money cannot be increased without limit by commercial banks. That’s just a mathematical reality, notwithstanding the fact that it’s not usually a binding constraint.

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Re:China lets yuan break 7-per-dollar level for first time i... by ajross on Monday August 05, 2019 @02:03PM (#20616530)

Right, there's an asymptote that caps the maximum amount of money in a system based on some initial M1 and a reserve fraction. But in practice that doesn't get hit because not all money is lent, so per upthread I think it's perfectly reasonable to say that "banks create money" in the abstract.

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Re:China lets yuan break 7-per-dollar level for first time i... by kgwgk on Monday August 05, 2019 @03:04PM (#20617442)

We agree. But note that this is in the context of the following exchange:

  >> they don't have the right to print money the way a central bank does.
  > Yes, they do.

Where the response ignores that that limit exists (may not be relevant in practice but it is in theory: a commercial bank can only give the loans that it can support with its existing reserves or those it may have access to, while for a central bank sky is the limit).

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