first, the value of money is determined by the goods & services it can purchase:
however, when a community of government-chartered lending companies ("banks") are granted the privilege of using the same money many times over to fund multiple loans, there will be an increase in the total supply of money because the definition of "money supply" is altered to include the notes receivables of all "banks" (money supply = money + notes receivables):
- money is a service supplied by the u.s. treasury that identifies & communicates when value has cleared between consumers of risk*. mathematically, the value of the money was measured, accepted, & received by the seller, and an equal value of the goods or services was measured, accepted, & received by the buyer
- the notes receivables identifying & communicating when the promise of increased value will clear in the future is a service supplied by "banks" mathematically, the value of the money is measured, accepted, & received by the seller (borrower), and an equal value of the note's risk is measured, accepted, & received by the buyer (lender)
currently, modern economists say "banks create money" because the notes receivables of all "banks" is judged by the government to be equal to money
not only is the "money = notes receivables" opinion absurd (value delivered in the past ≠ value expected in the future†), but so is the vernacular used by economists who fail to uphold a scientific standard in their explanation of how the ownership of creditworthiness & risk evolves under such an assumption: government authority is used to assert the unmeasured, untested, and therefore unearned creditworthiness of firms that may purchase multiple notes using the same money, thereby socializing & multiplying the risk of any event where a promise to deliver the goods and/or services required from the note's seller (borrower) to redeem its value from its purchaser (lender) is disproven
since government regulation is an empty counter-measure for using government authority to violate the natural principle that governs the flow of value & liability, the cost of systematizing financial risk must therefore be transferred to the pocket of consumers in the following way: as the likelihood of poor judgement in lending does not result in a commensurate increase in the amount of goods and services produced (money ≠ notes receivables), it is this incommensurate result—involving an increased "Money" supply chasing around a smaller increase in the goods and services produced...
...that is called monetary inflation (Δ "Money" Supply - Δ Goods & Services Produced > 0):
stated another way, the public's purchasing power is appropriated by a government that severs the continuity of risk's accountability to pay for the falsely assumed credit-worthiness of government-chartered lending companies
credit is to be earned, and not created
computing the receivables of "banks" as part of the money supply is eliminated with the introduction of systemaccounting since a law of conservation of value & liability seals risk between the consumer of a note (the lender) and its producer (the borrower)
as "monetary" value remains a conserved quantity at all times, "monetary" inflation does not occur within the system:
*note: 'transaction risk' differs from 'financial risk'. if a transaction fails from theft, an ideally-swift intervention from the justice system will correct a result that does not confirm the previously-agreed-upon outcome defined between the buyer and seller. if finance fails, its cost of ownership is NOT transferred to the state since the owner accepted the risk of default when they consumed it
†note: an apple farmer plants a seed, grows a tree, harvests an apple, locates a potential buyer, sells the apple, then stores the money in a "bank". the "banker" then lends the money by purchasing a note offered by some borrower. the cash stored in the vault is replaced by the borrower's note. a "banker" is someone authorized by the government to enforce the following absurdity, "my expectation this note will prove physically predictive is equal to the value of the apple farmer's labor & materials delivered in the past." in short, democratic authority is naively cited to equate "apples" with "promised apples"