Hi, not sure if it's still possible to make comments on this section, but since Vollgeld is still very topical, I assume a comment would be relevant.

I read the Benes and Kumhof paper and wonder about one of the key assertions they make: that often credit is created "for the sole purpose of creating an adequate money supply" (p.7) They lump mortgages, consumer loans and working capital loans into this category - that is, they assert borrowers take out these loans for the sole purpose of creating bank deposits (money) with which to effect payments by way of inter- or intra-bank transfers. On this basis, the authors argue that these loans can be paid-out with no economic impact, since the deposits are no longer necessary, as there will be enough treasury credit to provide all the liquidity needed.

I have problems with this assertion as there is a strong economic incentive not to take out a loan for the sake of simply creating a deposit: the interest rate charged on the loan is much higher (around 2%) than the interest paid on the deposit. That's a high price to pay for liquidity. I would aver that such loans are indeed taken out for the credit they provide, and not just the liquidity they provide.

The authors contend (Fig.3, p 66) that such loans (Manufacture Deposits and Constrained Household Deposits) amount to 80% of gdp. Surely the large bulk of these should be re-classified as investment loans.