moonbat1775

Banks Not Lending Anymore? Simply Untrue

"Could it be that the entire basis of the economy's "growth" is due to ever accelerating lending and that slowing loan growth rates are resulting in a stagnating economy?" Smarty

The basics of fractional reserve banking are:

1. Create principal from nothing.
2. loan it out for interest
3. As loans are repaid, principal goes back to nothing.

As a consequence, if the amount of new loans is less than the repayment rate of old loans deflation is occurring.