The Vet

Four-Digit Gold Sets a New World Order

"Charlie the counterfeiter adds an extra demand for goods and services without making any contribution to the production of goods and services."

We don't need Charlie, to create that extra money, the banks do that quite easily and legally on their own through the mechanism of fractional reserve lending.

The theory is that that excess credit which is created by fractional reserve lending and circulated into the community is ultimately removed when the loan is repayed to the lending institution.

However where the asset backing that loan loses value and the borrower walks away, the loan isn't repaid and the "excess" credit previously created is still out there and it cannot be removed.

When the borrower walks away, he is in effect like Charlie the counterfeiter, he passed on the benefit of the "created cash" to the builder of the house but ultimately produces nothing of lasting value to add to the pool of goods. True the house he once owned may still exist but it is worth only a fraction of the outstanding loan until such times as housing prices recover. Until that loss is either repaid or written off then the effect is to increase the money supply by the diference between the current value and the original purchase price.