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Government debt and fractional reserve banking are two totally unrelated concepts. The latter is what increases money in circulation. Government debt only incre
by jganetsk 15y ago
Government debt and fractional reserve banking are two totally unrelated concepts. The latter is what increases money in circulation. Government debt only increases the debt instruments in circulation. Debt instruments, as far as I know, cannot be used to meet reserve requirements.
China, however, has a currency which is pegged to the dollar and backed by the US treasury. As a result, our government debt increases their money supply.
- morsch 15y agoWell, obviously they're not totally unrelated, but I agree they are orthogonal. However, I was asking an honest question, how much of the money generated through fractional reserve banking is public debt? Ie. what's the ratio private/public debt?
- sgoranson 15y agoeih...isn't every dollar a Federal Reserve Note, i.e. the monetization of US debt? I'm pretty sure they're intimately related.