>> And then, what happens if a debtor pays back its debt? Is that money consequently getting "erased" again ?
>Yep, pretty much...
I would add that if the system is fractional reserve then it increases the proportion of the bank's reserve allowing more money to be created. So while it's technically true that it's destroyed you could see the next loan as its reincarnation, no..?
I didn't go here in my response above because my vague understanding is that we're not strictly a fractional reserve system any more, though I don't understand how.
There's also a concept of "capital deepening". Basically, while vague, when your monetary supply growth outpaces GDP, which is not hard to do with low single digit GDP growth you have more capital available for "one unit of GDP". Therefore asset prices go up.
At least for non private companies ...asset prices go up....auctions clear at values with maximum leverage...recession....monetary stimulus....repeat.
>Yep, pretty much...
I would add that if the system is fractional reserve then it increases the proportion of the bank's reserve allowing more money to be created. So while it's technically true that it's destroyed you could see the next loan as its reincarnation, no..?
I didn't go here in my response above because my vague understanding is that we're not strictly a fractional reserve system any more, though I don't understand how.