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An excellent lecture (in German) about money creation, growth and speculation. Essentially Binswanger argues that economic growth depends on ongoing money creation from nothing. The conventional loanable funds theory is illogical: an economy cannot grow if investments are to be financed via savings. Savings reduce consumption, thus: what companies receive in the form of savings they will lack in terms of demand for their products. Rather investment creates savings. From new money new purchasing power is fed into the economy which fuels economic growth, and from this growing "pie" people may divert additional savings.
Creation of new money can have two effects. If the money is used for productive purposes providing us with more and better useful goods and services, the result is growth that makes us wealthier and better off in other ways.
Increasing the money supply through fiat money additionally created ex nihilo can also have negative repercussions. If productive investment is insufficient, more money will compete for the same or even less products and services, kindling inflation. Another negative effect occurs when new money goes into speculative markets that do not add to the productive infrastructure and resource base of an economy, creating bubbles in the financial markets and related sectors (real estate).
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