> Well, lending new money (i.e. an increase of lending over previous lending) does expand money supply and create inflation. You are talking about lending by b

> Well, lending new money (i.e. an increase of lending over previous lending) does expand money supply and create inflation. You are talking about lending by banks, and/or the central bank, which is quite clearly money creation. New lending of your money to your friend does not create additional money. There's also a word game going on here. What you are describing is a situation where I lend money to my friend, and for the purpose of your analysis, you assume that I will always have lent out a similar amount of money forever starting now. That's fine if that's what you want to analyse. But that isn't the situation I described.