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Loans create deposits. Banks are not constrained to make loans based on how much is on deposit.
by chrisgd 9y ago
Loans create deposits. Banks are not constrained to make loans based on how much is on deposit.
- WalterBright 9y ago> Loans create deposits Initially, yes. But people borrow money in order to spend it, not leave it on deposit. > not constrained That's right, just as airlines are not constrained to keep their airplanes flying payloads. But if they don't, they are not making money. Every time you step in a bank, they try to sell you a loan for a reason.