Credit Expansion Fallacy

The increase of monetary units, as in the case of a split or new coin, does not create credit.

Seigniorage is a tax. The created monetary units do not represent new capital but instead the dilution of existing units by the state, transferring ownership of the capital that they represent. As this capital is put to use in the subsidy of lending by the state banking cartel, as discounted capital and insurance, the cost of capital is reduced to the bank's customers.

This so-called credit expansion is not simply the result of fractional banking as a market force. It is the consequence of the state favoring debtors at the expense savers. In a free market of banking, banks are simply investment funds. Investors on average obtain a market return on capital and suffer the risk of doing so. In state banking risk, and therefore capital, are rearranged according to political objectives.

Market credit expansion is an increase in the lending of capital, as opposed to its hoarding. Increased rates of lending are a consequence of reduced time preference, and reduce the cost of capital. It is impossible to prove that creation of a split or new coin, or anything else, impacts time preference in a predictable manner. As such it is an error of assumption that it reduces the cost of capital.

The error is presumably a consequence of assuming that credit expansion driven by state monetary expansion is a market force. However a hard money cannot produce seigniorage.