Tuesday, December 30, 2008

Interesting view on how money is transimitted into the banking system

I came across this website and it presented a view of money (as printed and put into circulation by the Fed) that, quite frankly, I have never heard of or thought of before.

All new money is loaned into circulation as an interest bearing debt. Since this system only creates the principal and never the interest, the debt is always greater than the money supply

I suppose it is a good question: When the Federal Reserve increases the money supply, why does it go through the banking system to create money through loans, therefore DEBT, as opposed to being spent directly into the economy by individuals, business, or govenments?

Seems as though investors and bankers are the chief beneficiaries...Any comments?
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