5 ms·

I see what you are saying, I agree, we are just arguing over words. Technically, you are correct - they don't lend out more than what is deposited, but what is

I see what you are saying, I agree, we are just arguing over words. Technically, you are correct - they don't lend out more than what is deposited, but what is deposited is 'created' (or at least deposited and lent money against those deposits are both considered 'in circulation') by they or other banks, ergo, banks end up lending out considerably more money than is created from the central bank.

kgwgk 9y ago
We agree, then. Simplifying a bit, M0 (physical cash) is lower than M1 (M0 + checking accounts) and M2 (M1 + savings accounts) which are the usual measures for money in circulation. Note that there are also broader definitions of money, including as well long-term deposits and other money-like instruments.