Well, for the bank it makes a difference since a backed loan (eg most things real estate or other collateral) are generally less risky. While things without collateral (e.g. student loans) are more risky. 

In the EU the Basel laws limit how much a bank can lend out depending on risk and foreign capitals (e.g. deposits) and own capital (what the bank legally owns itself). So having lots of secure mortgages or having few risky loans which would both be according to the law actually do make a difference in the amount of money supply increase wile just being a different risk/return ratio for the bank.

zuspotirko

Question: 

isn't there a difference in asset backing, though, between 100% backed and not 100% backed?

the article i linked above references 100% reserve backed paper, and discusses it at length.



itsrealfake

Daily discussion thread

saloon

> Asset Backed Loans, like lending against a house, don't appear to fabricate money out of thin air.

Incorrect. The balance sheet of a bank as a whole lends out more money than it gets in deposits (in Europe according to the Basel laws). You cannot say credit x increases money supply and credit y does not.