Inflation – How The Fed Picks Your Pocket and Raids Your Bank Account
Sharon SecorThe Federal Reserve is the central bank of the United States and controls national monetary policy. The Fed, not to be confused with the federal government of which it is not a part, also picks your pockets and raids your bank accounts.
Of course, deposits created out of thin air can also disappear back into thin air when the debts underlying the deposits get defaulted on, and the banks have to write down the loans. Repeat that on big-ticket items like housing, running hundreds of thousands or millions of dollars each, millions of times across the nation, and suddenly there is a lot less credit in the sum of currency plus credit. Debt destruction, the same as credit destruction, acts like money destruction, which is the essence of deflation - the final collapse of a credit-fueled expansion.
Pastor Rendahl:
You are correct only to the extent that the credit is held within the bank that created it on a line of credit, for example.
Once the multiplier has run its course, however, there is no reclaiming of that effect. There is a creation of 9x the underlying capital and, if that capital goes to zero, an infinite multiplier.
Assuming, of course, contracts, which is a piss-poor assumption today.