Banks create money on demand by discounting collateral. Government creates money on demand by discounting the power to tax.
Fiat money disappears by the drain to taxation, to repaying loans and to 'rainy day funds'.
Fractional reserve banking absolutely exists.
QE is so thinly related I can hardly imagine how you could contort it to have "disproved" something which is codified in law and taught in basic finance and economics courses.
The reserve ratio in the UK and Canada is zero. Which means we should have infinite money in the banking system according to your beliefs.
Yet demonstrably we do not.
You have the line of causality backward, as the Bank of England helpfully explains in detail here: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
2) "infinite money" without a legal limit to reserve ratios would only occur if every single bank actually had exactly 0% reserves, and it would take infinite time and infinite transactions for that to occur.
FYI using the observed absence of 'infinity' as a proof is generally poor logic as there is lots of mechanisms blocking infinity from occurring in reality.
That money will eventually be used again but it's worse than paying someone to dig and fill a hole.
Q: How much money flows into "X" market? A: None, money flows THROUGH markets.
If the market valuation goes up to Y+Z, you could say money has "entered" the stock market, pushing its share of value to (Y+Z)/(X+Y+Z) even though the money in circulation, X, could be unchanged.
Yes, when you buy newly issued shares from Apple (rare), cash flows through the stock market into Apple's accounts, but again, no money went 'into' the stock market.
If you're talking about Apple selling devices, then it's another concept entirely.
Yes, when an item goes through something, it is briefly inside of that thing. I agree.
“Well if those poor people weren’t gambling on that ponzi scheme for a new dog coin they would actually be materially improving their living conditions and prices for everyone else would go up”
It’s interesting to see the wealth transfer of all these people that usually buy weekly lotto tickets get crypto instead and send their 10s of millions to programmers making an ICO and a fancy website.
You buy 1 BTC from me for 60k. Now let's say I want to buy BTC again, but you want to sell it for 120k, so now I buy 0.5 BTC from you for 60k, and if everyone agrees that 120k should be the fair price, we've just bid up the market cap and value of BTC without really increasing the fiat.
Now imagine that with different crypto, stocks, other financial instruments, real estate, etc etc and in different combinations and with margin and derivatives and what not.
If anyone in their chain borrows against their inflated crypto, that creates new fiat.
So it has, by your own admission. You predict a worse eventual outcome, which is not insightful. When this will all end badly is the question, not if. Rome lasted a good long time playing these games.
It feels like saying Elon Musk will make make your next stop at the grocer's more expensive, because selling his 10% of shares for $20 billion will contribute to inflation because of all the stuff he's gonna buy with that money.
I wonder about the price of real estate in Brownsville though
Even a single adult with no kids would have gotten $3,200 so far.
I mean, damn, how much is rent in your city?
https://www.pgpf.org/blog/2021/03/what-to-know-about-all-thr...
I don’t think any of the stimulus checks covered a month’s rent in any major city, and the checks weren’t coming monthly.
(Now, I also don't qualify for the stimulus, and if I did, I would probably have been unable to afford a 1 bedroom apt. here.)
It’s the near zero interest rate policy, the literally illegal purchasing of mortgage and corporate bonds by the fed and so much more that is flushing the entire economy with trillions of dollars.
As the fed buys bonds, it raises the price which lowers the rate.
As rates are lowered for things like mortgages and corporate bonds, people and corporations have more money to spend. Which they do generally spend which stimulates the economy.
Lower rates also cause corporations and people to borrow more which in a fractional reserve banking system actually creates money out of thin air. The reason why corporations borrow more is because with a lower WACC (weight average cost capital) they can invest in more projects (I.e. spend money) for any initiative that has a positive NPV.
All this results in higher wage expectations due to people expecting higher wages based on higher prices (gasoline, cars etc) which moves the fed money to people's hands and increases the prices of consumer goods including fmcg like TP.
As you can see there is a long link from cause to effect which is why we are seeing the slow increase in inflation. In many sectors like agriculture this is not even priced in yet as they are ultra competitive. But as their inputs go up (people and raw materials, hardware ), they will also have to increase prices.
Even when eventually fed raises rates or tapers their buying, prices once gone up have a way of sticking around unless efficiency improvements like automation reduce input costs.
Scenario 1: Fed buys $20 billion of corporate bonds per month from Microsoft.
Scenario 2: Fed does not buy $20 billion of corporate bonds per month from Microsoft.
Consider all other things being equal, in the first scenario Microsoft's borrowing costs are drastically reduced. This means that Microsoft has more money. This means that Microsoft is able to hire more people, that the people that work for them get larger bonuses because they are typically tied to the profitability of the company.
This puts more money into real people's hands to buy toilet paper and golf clubs. That then multiplies throughout the economy. Suggestions for additional reading if you are really interested in these things:
1. Money Multiplier
https://www.albany.edu/~bd445/Economics_350_Money_and_Bankin...
2. M1 vs M2 money supply
https://www.investopedia.com/terms/m/moneysupply.asp
3. Fractional reserve banking
https://www.investopedia.com/terms/f/fractionalreservebankin...
4. Fed open market operations
https://www.investopedia.com/terms/o/openmarketoperations.as...
Example: Joe just had a kid and was going to buy a house in a good school district no matter the cost. With a higher mortgage rates, he'd have wound up house poor for a few years. With today's rates, he has a comfortable savings rate. Since he's not scrimping, he decides this month he'll buy that putter he'd been eying.