Re: Could Someone Please Explain the Money Supply?
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Sure, maybe the borrower gets a below-market interest rate, but that's only a very small part of the benefit. Most of it goes to the lender in this situation.
It's entirely possible that I've completely misinterpreted your reply, though and that it has to do with some other effect.
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You've got a pretty good handle on it; one thing you're missing, though, is that as the new money circulates, it devalues all other money (by dillution). The guy getting the loan gets to spend the money first, before it gets devalued.
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