Growth Verses Growths

In my last post, I tried to flesh out how the gold standard backing money worked, focusing on the fact that a dollar's worth of gold does not back a dollar's worth of paper currency. That myth simply needs to be put to rest. Retiring myths is difficult, however, unless everyone understand how the gold standard really works.

In this post, I would like to put forth my conjecture about how the current system of loans works fairly well as a back to our money supply, but how several of the largest banks have perverted that system in pursuit of ever greater returns on their money. I ended that last post by demonstrating how a dollar's worth of gold under the gold standard backs a greater amount of paper money. This illustration shows a 6:1 reserve:



( Before we go any farther, let's slide a cut here to tease you, the readers, into going clicky if you would like. )