Most Americans who closely follow economics understand that all money in the United States comes into existence as debt. Either the Federal Reserve creates it when the U.S. government borrows money, or private banks create it when they use fractional reserve banking to make loans to customers. If lending increases, it is going to create new money and increase the money supply. But if lending declines, it is going to take money out of the system and will decrease the money supply. So why is this important? It is important because without sufficient lending, the U.S. economy will seize up and grind to a standstill. Unfortunately, we have created an economic system that is fueled by credit, and without enough credit businesses can't expand or hire more workers, individuals can't buy homes and cars and there will not be any hope that the U.S. economy will function at previous levels. (Read More....)
