To understand why this is so, the difference between transfer-of-savings-credit and credit expansion must be explained. Transfer credit is extended when a borrower borrows money that someone saved…
Credit expansion is an entirely different type of transaction. When banks expand credit there is no saver anywhere involved. For a bank to expand credit, it creates new paper claims to money – bank notes or fractional reserve checking deposits – o__ut of nothing at all and loans them as if they were money. These paper money substitutes “give to somebody the means of purchasing goods without at the same time diminishing the money spending power of somebody else,…"
“Credit expansion is problematic, and the RBD is problematic because it relies on credit expansion.”
the author says transfer credit is form savings…he then goes on to say that credit expansion creates money-use out of thin air, credit iow…a hayek quote says give to somebody the means of purchasing goods without at the same time diminishing the money spending power of somebody else…"
then the author goes on to say that credit expansion is problematic…meaning that is creates problems for people? what was hayek saying?
another person says
“…[incorrectly] viewing the RBD as a recipe for making the quantity of money move in step with the quantity of goods. a better way to look at the RBD is that it is a way to make the quantity of money move in step with its backing…”
is there much of a distinction between money moving in step with a quantity of goods and a ‘quantity’ of backing?? moneys backing is a good, right? productive land, financial assets (money accounts), gold, etc?
http://blog.mises.org/archives/004169.asp
also…if there is an owned asset…i have read at mises blogs that monetizing (making paper documents claiming a money value of the asset) the asset or creating documents that indicate an asset backing to them (rbd i guess) is somehow non-inflationary..different form credit expansion and non-problematic.
does the dollar/credit/fed/frb combo that i have read exists essentially work like what some call rbd?
does the federal reserve buy financial assets (bundles of dollar claims) by instantly bringing forth new dollars(either electronic or paper) and claim that the new dollars are backed?
if so, are these assets backed by the new money? were they already backed in some way before the federal reserve purchased them? can claims on dollars even be backed by verbal or written promises?
so, outside of theory is the current system for the most part operationally like what is called rbd?
lastly, is a credit expnasion regime (if true) problematic if
“when prices are adjusted for inflation, Americans today spend '40% less on clothes, 20% less on food, more than 50% less on appliances, about 25% less on owning and maintaining a car’than they did during the early 1970s. Over that same period, Census Bureau tables show, US median household income rose by at least 18% in constant dollars . . .”