My answer above: --- No,there is a difference:

If NVDA gives a loan, its a swap on the active/left part of their balance sheet - thus, this does not have an effect on overall(!) money suppley. The balance stays the same, also the total amount of money in the whole system at that current point in time.

If a bank gives a loan, then it is extending/enlengthing its balance sheet. (the money created,though,needs to be available on the central bank account to float to other banks when paying for something,therefore we have liquity rules in reg reporting in a bank etc.,meaning someone else needs to have increase thecentral banking liquidity at another part in the system, see things like: https://en.wikipedia.org/wiki/Maturity_transformation ) ---

As working in the field, I know the BOE paper very well ;-)

> Sorry, I meant revenues. If Nvidia's revenues stay stable,

But aren‘t they currently sitting on like a margin of over 80%? So I assume their revenue will fall, because people are not going to like that in the long-term.

> It absolutely is. Similar to the way banks create money [1]. The commitments support credit that wouldn't exist without it.

Making a loan/offering credit isn't automatically money creation - the amount of money in the system before and after the loan might be the same. Haven't been following Nvidia all that closely, but it seems a little bit unlikely that they're a commercial bank. Financial chicanery they may be doing but offering deposit accounts would be new territory. The loan has to be made in a very particular way for it to be money creation (notably, in a way that creates new money), and it should be illegal for most people to do that otherwise we'd all be printing our own money instead of the printing being directed to wealthy asset owners first and foremost.

> Making a loan/offering credit isn't automatically money creation

The Fed can limitlessly increase monetary base (MB) to increase M1. Non-bank lenders create M4 which turns into M2 through the money markets which turns into M1 through the banks. More convoluted and more limited, by design. But the net effect is the same–more M1.

More broadly: when you open a bar tab, you're literally creating money, even if it never hits M1.

Credit is always money creation. When it's done at scale it's almost always creating M1.

> Credit is always money creation.

No, its not! Its a swap on the active/left side of the balance sheet: If my mum borrows me 1 USD for icecream, she did not create money, instead she swapped her positions in her assets/left side of her balance sheet.

If we attempted to pay our taxes by creating this new money, do you think we would succeed? Because I suspect that when we get to the tax office we will discover that what you're calling money is not actually money in the practical sense.

Or I suppose I should spend more time with an open bar tab come tax time.

The monetary aggregates are things that are theoretically equivalent to creating money, but I'm going to challenge whether it is proper to compare M4 activity to the fed balance sheet. One of those entities is involved in actual money creation. One of them is hyper-privileged money creation that is more impactful and less comparable to other forms.

> If we attempted to pay our taxes by creating this new money, do you think we would succeed?

Yes.

Nvidia issues a commitment to a firm that lets an SPV raise money. Some of that is just M1 being transferred from one account to another. A lot, however, will be created through loans (new M1), commercial paper (new M3) and the like. Some of that will be pledged as collateral. On the other side of the equation, when the SPV signs e.g. a construction contract, you'll have builders taking out bank loans and issuing commercial paper, et cetera.

You can pay your taxes out of a checking account using money a bank created out of thin air that morning that the Fed won't even learn about until the evening.

> monetary aggregates are things that are theoretically equivalent to creating money, but I'm going to challenge whether it is proper to compare M4 activity to the fed balance sheet

You're absolutely correct in M4 being unequal to the monetary base and deposits at the Federal Reserve. But the moment you say the Fed balance sheet, you're conflating two things. The Fed has lent, in the past, against non-Treasury collateral (most famoulsy, mortgage bonds).

And if we're talking about money in relation to the real economy, you can't spend reserves at the Fed. There is debate on what the most "real" money is, but pretty much everyone agrees that a deposit in a checking account is more relevant to the economy than unspendable reserves at the Fed.

> Yes.

How? And what is your theory why people pay taxes from their labour earnings instead of just creating new money to pay Just-In-Time?

> A lot, however, will be created through loans (new M1)

Isn't M1 is currency and overnight deposits? I'm pretty sure you're just making things up here; it sounds highly illegal for Nvidia to create new M1. Unless they've taken out a banking license when I wasn't looking.

> You can pay your taxes out of a checking account using money a bank created out of thin air that morning that the Fed won't even learn about until the evening.

Ditto prior. Nvidia isn't allowed to do that.

> How?

...from a checking account. Banks thoughtlessly lend against investment-grade commercial paper. The kind the SPVs Nvidia is commiting to are borrowing with. Nvidia's promises are creating debt that money markets and banks transmit into M1.

Note that the Fed doesn't directly create M1. It moderates it through the interbank lending market to manipulate the monetary base, M0 plus deposits at the Fed. That, in turn, influences banks' lending patterns which is what manipulates M1 and MZM. Underwriting M4 to drive up collateral that in turn increases M1 is the same mechanism, different channel.

> what is your theory why people pay taxes from their labour earnings instead of just creating new money to pay Just-In-Time?

I'm not Nvidia. I did just sign a purchase order with a builder for my deck that their local bank called me to confirm before issuing a loan that will appear as new money in their checking account. My signature, in that case, enabled the bank to create a tiny amount of money. It's not monetarily significant, however, because my deck isn't that fancy.

At the end of the day, all credit is money. If you can create credit, you can create money. Most of us can't, at least not in significant quantities.

> Isn't M1 is currency and overnight deposits?

M0 + demand deposits at commercial banks, yes.

> sounds highly illegal for Nvidia to create new M1

Nvidia causes the creation of new M1 through banks. Nvidia's commitments directly create money of a quantifiable amount that wouldn't have existed if Huang hadn't flicked his pen.

> unless they've taken out a banking license

Fun fact, you don't need a banking license to issue traveler's checks. And traveler's checks are counted in M1 in the U.S.

> pretty sure you're just making things up here

If that's your reaction to encountering new information, godspeed.

> ...from a checking account. Banks ...

We've got Schrodinger's money here! One minute I can go down to the bar and create as much money as I like with the bartender. Then the next we suddenly discover that yes we need a bank and yes there all of a sudden a checking account is involved and no a bar tab isn't a legally recognised form of money.

> I'm not Nvidia. I did just sign a purchase order with a builder...

Again though, we discover that in fact the person in control of the part where the actual money was created was a bank. You can't just head off with your builder and create money - otherwise you'd be stupid to stop until you unseat whoever was the richest fellow in the world this morning.

> Nvidia causes the creation of new M1 through banks.

And the banks make another appearance!

---

I put it to you that Nvidia can't, in fact, create new money. You'd never get that line of argument past a tax collector.

> Fun fact, you don't need a banking license to issue traveler's checks. And traveler's checks are counted in M1 in the U.S.

And I'll add in postcript that I know nothing about travellers checks in the US, but I'm quietly confident it'd turn out to be illegal to go around creating vast amounts of new money there too, on the basis that people tend to work for a living.