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Yes, my point is they're not untethered to the deposits. The money is synthesized via the leverage (reserve) ratio. A bank with $100 in deposits gets to lend ou
by darawk 8y ago
Yes, my point is they're not untethered to the deposits. The money is synthesized via the leverage (reserve) ratio. A bank with $100 in deposits gets to lend out $1000. But they don't get to lend out any arbitrary figure that they choose.
- stephen_g 8y agoYou can’t actually know how much a bank can lend from the amount of reserves or the amount of deposits they have - how much they can lend is actually based on the amount of capital.
- darawk 8y agoYes you can. How much they can lend is determined by their reserves. How much they will lend is determined by other forces.