Why did the US banks loan the money in the first place?
The War had to be financed somehow and the economy was actually in a recession. Money is funny because it is actually created by a book keepers trick. Debt creates money. If you go to a bank and qualify for a loan you give them an agreement to pay the loan back. They accept that as a check. Then they give you an account and credit the money you promissed to pay into the account as cash. Nice eh. Notice that there is only an agreement that you owe them money so far. If you had that money you would just go buy the house instead of making a promiss to pay the bank money that does not even exist yet. Now they are looking at the money in your account and your promise of payment both as real money. Here is where it gets interesting. They can loan ten times their cash reserves and secured credit like a house loan counts as cash reserves. A 1 million dollar loan equals 10 million in money supply all generated through nothing but credit based on real estate. It is a bubble and it is inflationar
