Re: Hummel Inquiry

[Doug Henwood <dhenwood@xxxxxxxxx>]

Warren Mosler wrote:

>Loans create deposits.  The banking system can always create new loans.
>They don't need or have any use for 'deposits to make loans with.'
>This is more explicit at the larger banks.  They make loans first and
>then fund them.

But only because there's enough money sloshing around the system. If the
central bank decides not to validate the additional credit creation, things
get crunchy, and loan expansion ceases (sooner or later, allowing for all
the Minskian innovations).

Doug