My understanding is that the banks do keep 10% in reserve and loan out 90% and that in itself creates new money.
I think you for the most part nailed it, although some have called this "velocity of money" and not "new money". A technicality, but one worth noting. I cannot vouch for the 10% number, but I have read numbers close to that over the last 6 or 7 years. Either way, it impacts economic activity and inflation.
When I was in high school (longer ago than I care to admit) this number ranged from about 17% to 19%. I think the number began to come down drastically during the Greenspan years and may have helped create the housing bubble.
08/24/2011 1:28:27 PM PDT
· 5 of 22 mlocher
to NormsRevenge
Gold prices are plunging as investors grow more confident about the global economy.
More of the MSM pimping the Obama agenda. A lot of people piled on the gold bandwagon recently. Gold was overbought and the market corrected. The newbies, unsure of their true convictions, bailed, making the sell off worse.
Thanks for the ping. Interesting how Obama can get immediate feedback and take corrective action if he so deems. You know that his staff is doing this in addition to focus groups and polls.