📰 Source: mises | Mises Wire

✍️ Original author: Frank Shostak

It is generally held that bank credit is a major driver of economic growth. Hence, it would appear that, through an increase in the supply of credit, banks could strengthen the process of wealth generation. Without previous private savings, however, banks cannot simply extend credit. On the other hand, banks can expand credit out of “thin air” via inflation. This type of credit damages the wealth-generating process. Take a farmer, Joe, who produced 2kg of potatoes. For his own consumption, he requires 1kg, and the rest he agrees to lend for one year to a farmer named Bob. The unconsumed 1kg of

This post was automatically imported by OratioRepostBot.