Soal Ekonomi Snmptn 2008 Paket 5

| Saturday, February 26, 2011


A fundamental fallacy accepted as fact throughout most of the economic and political communities is private debt is better for the economy than public debt. It is considered a fact beyond dispute that private debt stimulates an economy which leads to expansion while public debt is always a net drain on an economic system since it diverts money from the private sector.
In reality it doesn't matter who borrows the money: The economy cannot tell and doesn't care. To understand why where the borrowed funds originate does matter to the economic system, you have to understand fractional reserve banking. In a fractional reserve banking system the banking system can create and lend dollars, that is, purchasing power, out of thin air. Let's assume the current reserve requirements are 10%. This sounds like if a bank has one dollar in new deposits it can only lend ninety cents since it needs to hold ten percent of its deposits in reserve. And this would be true if there were only one bank. But when Bank A lends the ninety cents most, if not all the money, winds up in another account at another bank increasing its reserves by ninety cents. That bank holds onto $0.09 as reserves and lends the $0.81 which ends up in another account at Bank C. Bank C adds $0.08 to its reserves and lends the $0.73. As you can see, that original $1.00 increase in reserves has led to a substantially higher increase in purchasing power. This increase in purchasing power can be inflationary. After all, that is part of the traditional definition of inflation: An increase in purchasing power relative to the goods and services available for purchase.






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