Collect Call

"Tenth grade biology. Brachial artery...pumps 30 liters of blood a minute. There's only five in the human body. I'm sorry."
--Jessica Martin (Cellular)

It is important to differentiate between paper money printed and distributed by fiat, and credit money. If the government prints $1000 dollars and gives it to me as a gift, then the primary worry is the devaluation of these pieces of paper over time, prompting a decision of whether to spend them now or wait till later. But the holder does not owe anyone anything for the right to hold the paper and make the spending decision.

The dynamic is different with credit money. If the government creates $1000 worth of credit and I borrow it, then I still have $1000 in hand. But I owe someone for the right to hold/use this money. I have to pay the lender back and (usually) add some interest. Now, I not only have to decide whether/when to spend these funds, but I also have to worry about repayment.

Should my capacity for repayment become less certain, then I'm less prone to borrow credit money. If I've already spent credit money funds, then I'm essentially 'short' some or all of the loan, and need to acquire dollars in order to cover my short position.

It should be clear that the fiat gift situation tends to be inflationary. Money supply expands and each dollar falls in value, prompting folks to spend them rapidly.

It should also be clear the the credit money situation is deflationary. Money supply contracts as folks avoid borrowing and work instead on paying off debt. The value of remaining dollars tends to rise.

Now, connect this with the fact that 95%+ of current money supply is credit money, and what is the conclusion?

position in USD