Comment by ElProlactin
6 hours 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.
"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], which effectively increases the money supply from the broader economy's perspective.
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.
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.