posted on Jan, 7 2010 @ 10:31 AM
Inflation is your answer. In a healthy economy (not like we have here) there will be significant demand for that money to start new businesses,
Just ay all the banks have 1,000,000USD (unrealistic, but for simplicity's sake), and it can lend it at 5%. At 5% people want to borrow say 1.2
million USD. This demand is going to have the lenders short on supply, so they will increase interest rates to whatever the market will bear (say
6%). When the interest rates are at 6% the poeple who wanted to borrow the 200,000 will back out, thinking the money is too expensive for them.
If they didnt, all the money out there would drive up prices for things. IF everyone was chasing the same resources (say....copper) with those
increased amounts of dollars (For instance say the banks got money from central bank) and could lend out 1.2 million, they would chase the copper and
the price of copper would go up.
Hope that helps,