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All debt is money. Anybody can create money, the trick is getting other people to accept it. Nvidia is vendor financing its output. An ai company order $100m

All debt is money. Anybody can create money, the trick is getting other people to accept it. Nvidia is vendor financing its output. An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan. The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan Nvidia requests $100m of production based on its $100m of orders. The production company holds that debt like a bank loan. You now have a monetary loop. Take a single $10 bank deposit and Nvidia pays the production company, who pays the ai company who pays Nvidia. Run that round the circle a few million times and everybody has been paid. Rinse and repeat.

creativeSlumber 6d ago
If the debt cancels out doesn't this mean that there was no debt ?
- msdz 6d ago
  I’m guessing it doesn’t “cancel out” due to interest.
- JumpCrisscross 6d ago
  > If the debt cancels out doesn't this mean that there was no debt ? No. For the same reason that oxygen being transported into and out of the body doesn't mean there was no oxygen.
ElProlactin 6d ago
You should educate yourself about accounting. First, under US GAAP rules (ASC 606), you cannot recognize revenue from a vendor-financed sale unless it meets certain criteria, the biggest one of which is: it has to be probable that the buyer will actually pay you. If a default is likely, revenue recognition is deferred until cash changes hands. Nvidia's massive revenue is therefore not from a bunch of dubious vendor-financed sales to counterparties who don't have the money to pay and need a fraudulent scheme to make the arrangement work. Furthermore, Nvidia, by its own disclosure, indicates that when it extends financing to customers, they pay, on average, within 2 months (53 days to be exact). So these are not years-long extensions of credit.
- YokoZar 6d ago
  "Create money" here doesn't mean literally fluffing the balance sheet like when the fed prints money (which would have accounting differences), it means spending the same money more rapidly than otherwise. This is NVidia's personal contribution to increasing the economy's Money Multiplier [https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier], which effectively increases the money supply from the broader economy's perspective.
  - ElProlactin 6d ago
    You're conflating the money multiplier and velocity. They aren't the same thing. The multiplier is about banks turning reserves into deposits via lending while "spending the same money more rapidly" is velocity. This doesn't apply to Nvidia extending trade credit and this description of bank money creation isn't even the accepted version today anyway. Regarding velocity: a receivable on Nvidia's books isn't in M1 or M2 and nobody accepts it as payment. The AI company will still settle its bills with vendors and pay its employees in bank deposits. The "$10 running round the circle a million times" story is just netting. Clearinghouses have done this for centuries with literally 0 effect on the money supply. If the OP's production company can't actually deliver $100 million of goods, someone has to write it down and no amount of velocity makes the company solvent. Net-60 payment terms are ordinary trade credit that any major B2B supplier extends. It's no different for Boeing, Caterpillar or [name a major manufacturer). If you're going to call this "money creation," you're saying that every net-30 or net-60 invoice is "money creation" too, which is ridiculous because it's patently false. None of this is to say that there aren't legitimate circularity concerns about Nvidia, particularly around its equity stakes coming back as GPU orders. There are. But even those are about revenue quality and counterparty concentration, not monetary aggregates. Trying to make this a monetary argument when it's not actually weakens the circularity argument.
    - cryptonector 5d ago
      I'm a bit shocked that this comment got flagged and went dead -- it might or might not be correct in its claims, but flagging it seems ridiculous to me.
cryptonector 5d ago
In principle you need a banking license in order to create money, so not "anybody" can create money. For example, I can't, and neither can you (unless you're a bank, which I suspect you're not_.
- neilwilson 5d ago
  If you work for me and I owe you, that’s money. You can sell that debt on to somebody else in exchange for goods and services. That’s all money is - a circulating debt.
  - KellyCriterion 5d ago
    Not necessarily, could also be IOU, but usually today its the local money from a state/gov - you could also sign up for working for "1 liter of milk,3 potatoes etc."
- imtringued 5d ago
  His point is that vendor loans are a way to get around the banking license restriction. Of course this only works between two entities, not a general customer base. They get around that problem by pumping their valuation on the stock market where anyone can join.

creativeSlumber 6d ago

If the debt cancels out doesn't this mean that there was no debt ?

msdz 6d ago
I’m guessing it doesn’t “cancel out” due to interest.
JumpCrisscross 6d ago
> If the debt cancels out doesn't this mean that there was no debt ? No. For the same reason that oxygen being transported into and out of the body doesn't mean there was no oxygen.

ElProlactin 6d ago

You should educate yourself about accounting. First, under US GAAP rules (ASC 606), you cannot recognize revenue from a vendor-financed sale unless it meets certain criteria, the biggest one of which is: it has to be probable that the buyer will actually pay you. If a default is likely, revenue recognition is deferred until cash changes hands. Nvidia's massive revenue is therefore not from a bunch of dubious vendor-financed sales to counterparties who don't have the money to pay and need a fraudulent scheme to make the arrangement work. Furthermore, Nvidia, by its own disclosure, indicates that when it extends financing to customers, they pay, on average, within 2 months (53 days to be exact). So these are not years-long extensions of credit.

YokoZar 6d ago
"Create money" here doesn't mean literally fluffing the balance sheet like when the fed prints money (which would have accounting differences), it means spending the same money more rapidly than otherwise. This is NVidia's personal contribution to increasing the economy's Money Multiplier [https://en.wikipedia.org/wiki/Money_multiplier https://en.wikipedia.org/wiki/Money_multiplier], which effectively increases the money supply from the broader economy's perspective.
- ElProlactin 6d ago
  You're conflating the money multiplier and velocity. They aren't the same thing. The multiplier is about banks turning reserves into deposits via lending while "spending the same money more rapidly" is velocity. This doesn't apply to Nvidia extending trade credit and this description of bank money creation isn't even the accepted version today anyway. Regarding velocity: a receivable on Nvidia's books isn't in M1 or M2 and nobody accepts it as payment. The AI company will still settle its bills with vendors and pay its employees in bank deposits. The "$10 running round the circle a million times" story is just netting. Clearinghouses have done this for centuries with literally 0 effect on the money supply. If the OP's production company can't actually deliver $100 million of goods, someone has to write it down and no amount of velocity makes the company solvent. Net-60 payment terms are ordinary trade credit that any major B2B supplier extends. It's no different for Boeing, Caterpillar or [name a major manufacturer). If you're going to call this "money creation," you're saying that every net-30 or net-60 invoice is "money creation" too, which is ridiculous because it's patently false. None of this is to say that there aren't legitimate circularity concerns about Nvidia, particularly around its equity stakes coming back as GPU orders. There are. But even those are about revenue quality and counterparty concentration, not monetary aggregates. Trying to make this a monetary argument when it's not actually weakens the circularity argument.
  - cryptonector 5d ago
    I'm a bit shocked that this comment got flagged and went dead -- it might or might not be correct in its claims, but flagging it seems ridiculous to me.

cryptonector 5d ago

In principle you need a banking license in order to create money, so not "anybody" can create money. For example, I can't, and neither can you (unless you're a bank, which I suspect you're not_.

neilwilson 5d ago
If you work for me and I owe you, that’s money. You can sell that debt on to somebody else in exchange for goods and services. That’s all money is - a circulating debt.
- KellyCriterion 5d ago
  Not necessarily, could also be IOU, but usually today its the local money from a state/gov - you could also sign up for working for "1 liter of milk,3 potatoes etc."
imtringued 5d ago
His point is that vendor loans are a way to get around the banking license restriction. Of course this only works between two entities, not a general customer base. They get around that problem by pumping their valuation on the stock market where anyone can join.