I never thought about it from this angle. But I did think about it from a different one: loans allow for an increase in demand and that increases prices. So either way, it will up the inflation

It’s called “Fractional Reserve Banking”. The bank only needs to have about 10% of a loan on hand.

If a bank has $100, they can write a loan for $1,000; effectively putting $900 more into circulation. When that is spent, it gets deposited into a bank, which can then loan it out amplified again.

This could create infinite money, as I understand it. Since there is not infinite money, there must be a gap in my understanding somewhere.

I like Geoff Mann’s description: “When money is released into general circulation by a bank or a state, it is always issued via the process of debt creation. Which is to say, even though it is hard for many of us to believe, that much if not most of the money in circulation is produced when someone or some institution goes into debt. (Remember it need not be physical currency to circulate; currency represents a very small fraction of circulating money.) For example, when someone borrows money from a bank, it is not as if the bank has that money in bills and coins in a safe in the basement, nor does it have it in "digital" form. Instead, by lending money to the borrower (and thereby fulfilling its obligation to the debt contract), the bank basically "creates" that money. It simply creates a big hole in its own accounts, with a "minus" sign beside it. The debt contract stipulates that the borrower's obligation is to fill the hole by a set date. The money loaned does not need to pre-exist the debt contract. Which means that the debt contract literally creates the money, because the big hole the bank placed in its own accounts is mirrored by an equally large "pile" in the borrower's account. The borrower spends that money in the economy, and, in addition to the interest that is the price of using this money, slowly pays the bank back to fill the hole. The money produced via the loan is issued to the borrower who is then indebted, and the money represents the means of settling that debt.

The debt in this example is obviously private (be-tween a borrower and a private bank), but money produced by the creation of their credit-debt contract can circulate generally in the public realm-if you borrow to pay your tuition, the money you borrow is not special money only you can use. Your school can use it to pay instructors and buy office furniture, instructors can use it to buy groceries, and so on. The money is a product of your indebtedness, and you can transfer it to whomever you please- it is transferable debt. Now, in theory, a bank cannot go on creating money in this way without limit. Modern banking systems have regulated "capital requirements"; some portion of a banks money-loan portfolio must be covered by reserves of cash or cash-like assets. But the ratio in most capitalist nation-states is only around 10 percent, often even less.

Thus, at least in theory, unless all banks are simultaneously maxed out on their lending— unlikely, and even if it did happen, the banks merely have to go raise some more money to add to their reserves— the money supply can change size in response to demand for loans without direct state involvement.

Similarly, when the state creates money via spend-ing, "printing," borrowing, etc., the money issued is a form of state debt. State-issued money is a claim on the state by the holder of the money, and it circulates among all the other private bank-issued debt-money: transferable debt. So, for example, when you come to settle your account with the state (pay your taxes, say), the state must accept its own credit-issue as legitimate means of redemption. The money is transferable debt that must be accepted as equivalent to the abstract unit of account.“

The money supply grows because banks are only forced to keep some of their deposits as reserves. Everything else can be lend away. The formula for the amount of money they create (money multiplier) is as follows:

a = physical currency/bank deposits w = reserves/deposit accounts MM = 1+a/w+a

You can interprete w as the rate of reserves. So if we simplify the equation by assuming theres no cash it becomes:

MM = 1/w

So if the reserve ratio is 0.1, the MM would be 10, meaning that the money supply will be 10 times bigger than the monetary base (cash + reserves).

My sister works for the wealth management software fintech company Addepar that Peter Thiel founded as a quality control engineer :| this is a sentiment she has echoed. Specifically that we live in a post scarcity world, but governments/society have not caught up to that.

We must have different definitions of “scarcity”.

Which makes it even easier for a government to create and spend it :)

Or a bank. Or a billionaire. Or a hedge fund. Or a stock market maximizing algorithm.

My point is that the amount of money in existence is no longer centralized or anywhere near as relevant as how it's accumulated and ESPECIALLY how both it and tangible resources are distributed.

Gandhi figured out that "there is enough in this world to satisfy every man's need, but not enough for every man's greed" over half a century ago when ACTUAL scarcity was much more widespread and the rich were many times more constricted by laws and regulations than now.

Mentioning "Printing money", even metaphorically, is nothing but a distraction from the things that actually matter and make a difference one way or the other.

It's basically what China does, right? I remember a while back someone calling China a "currency manipulator" with the force of a slur, so I assume it's the kind of thing that really pisses off free market fetishists

The most accurate macroeconomic model is only 55% accurate.

It relies on the idea that, since the government can 'print money' to pay the interest on debts, it can borrow freely. What do you expect the lenders to do in response?

That can be a little tricky though. Are you creating money to pay for education, or are you creating money so consumers can buy bigger SUVs instead of paying the taxes that should be used to cover education?

Why choose inflation when you can just as easily raise other taxes?

I'm sure you agree with me that increasing taxes on inheritance, property, capital gains or really high income would be more efficient than printing money.

No, it's Modern Monetary Theory which is that all debt creation de facto creates ("prints") money, so unless you cease all loan creation you're always printing money, and thus it should be more accepted to use debt to invest in long term projects.