Lending is one of the premium ways of expansion of money supply. If you start a business or a construction project, you take out a loan in the bank, which in fact increases the amount of money in the economy (you use this money to pay your employees, subcontractors and so on). The process works two-ways: lower rates encourage lending and business activity, but positive business outlook encourages lending in its own right.
CIO, HonTe Investments. Ran global macro at JPM. Yahoo! Finance Contributor. Ph.D. in Mathematics. Author, The Next Perfect Trade. No investment advice.
