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Are you really claiming that a deposit account is NOT an asset for its owner or that a bank's deposit book is NOT considered a liability? That's what "doesn't

by derriz 6y ago

Are you really claiming that a deposit account is NOT an asset for its owner or that a bank's deposit book is NOT considered a liability? That's what "doesn't actually reflect how it works" is suggesting to me? Yet to contest these two simple facts makes no sense since they are trivial to verify? Do you own any deposit accounts? Do you consider the money in them to be counted among your assets? And if you look at Bank of America's balance sheet (https://finance.yahoo.com/quote/BAC/balance-sheet/ https://finance.yahoo.com/quote/BAC/balance-sheet/), and drill into the liabilities list, you'll find the value of all their deposit accounts.

Godel_unicode 6y ago
You should read what I wrote to try and understand it, as opposed to looking for what you expect to see. As I said, from the banks perspective they have an asset (the cash) and an offsetting liability (the deposit account). From the account holders perspective, there is an of course an asset (the title to the account). It's slightly more complicated, as the bank doesn't actually hold your cash as cash. It deploys it in a variety of financial instruments to make money. Go back and read the assets section of that balance sheet more carefully, and you'll see this. The point is that deposit is a technical term with a specific meaning. Namely, it is the agreement between the depositor and the bank that the bank now owes the depositor an amount of money which happens to be equal to the amount of principal deposited plus any accrued interest. If you had any deposit accounts and had thought about how they work, I'm sure you would have worked this out.
- kinkrtyavimoodh 6y ago
  "The point is that deposit is a technical term with a specific meaning. Namely, it is the agreement between the depositor and the bank that the bank now owes the depositor an amount of money which happens to be equal to the amount of principal deposited plus any accrued interest." I think my point and that of other commenters is that this is self-evident to almost everyone. It is not a confusion, because people's mental model of a bank (I give them money to hold on my behalf, and I can get that money back from them later, and depending on the situation, maybe a little more called interest) actually does represent this reality. Of course it doesn't represent it using the same terms because the terms are technical terms, but it's not clear how the lay person's mental model is wrong.
  - the_other 6y ago
    If I have understood the article correctly, I’m lead to disagree with what you’ve written. I think “most people” believe they get back the same kind of money they pay in. So, if they paid in state money, they’d get state money back. The article says they get “bank money” back.
    - kinkrtyavimoodh 6y ago
      If I go to the bank with a hundred dollar bill, 'deposit' it, whereby my account now shows $100 more, and then go to the bank after a year and withdraw $100 from my account, so that I now end up with a different $100 bill, it's not clear to me how the first $100 bill was state money but the second one was bank money.
- derriz 6y ago
  A deposit is not an asset for the bank - it’s a liability - have you ever even looked at the balance sheet of a bank? I even provided a link which demonstrates that deposit accounts are listed as bank liabilities. is There is simply no question on this fact. So to put it simply you’re just wrong. You’re confusing the concept of a deposit with the funds used to create the account. People who don’t understand basic double entry accounting or banking operations often make this mistake - like the author of the original piece.
  - the_other 6y ago
    > A deposit is not an asset for the bank - it’s a liability You are repeating the words and ideas of the person you are responding to, yet claiming they have said the opposite and accusing them of not understanding what they wrote. I don’t understand your contribution.
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by derriz 6y ago

Godel_unicode 6y ago

You should read what I wrote to try and understand it, as opposed to looking for what you expect to see. As I said, from the banks perspective they have an asset (the cash) and an offsetting liability (the deposit account). From the account holders perspective, there is an of course an asset (the title to the account). It's slightly more complicated, as the bank doesn't actually hold your cash as cash. It deploys it in a variety of financial instruments to make money. Go back and read the assets section of that balance sheet more carefully, and you'll see this. The point is that deposit is a technical term with a specific meaning. Namely, it is the agreement between the depositor and the bank that the bank now owes the depositor an amount of money which happens to be equal to the amount of principal deposited plus any accrued interest. If you had any deposit accounts and had thought about how they work, I'm sure you would have worked this out.

kinkrtyavimoodh 6y ago
"The point is that deposit is a technical term with a specific meaning. Namely, it is the agreement between the depositor and the bank that the bank now owes the depositor an amount of money which happens to be equal to the amount of principal deposited plus any accrued interest." I think my point and that of other commenters is that this is self-evident to almost everyone. It is not a confusion, because people's mental model of a bank (I give them money to hold on my behalf, and I can get that money back from them later, and depending on the situation, maybe a little more called interest) actually does represent this reality. Of course it doesn't represent it using the same terms because the terms are technical terms, but it's not clear how the lay person's mental model is wrong.
- the_other 6y ago
  If I have understood the article correctly, I’m lead to disagree with what you’ve written. I think “most people” believe they get back the same kind of money they pay in. So, if they paid in state money, they’d get state money back. The article says they get “bank money” back.
  - kinkrtyavimoodh 6y ago
    If I go to the bank with a hundred dollar bill, 'deposit' it, whereby my account now shows $100 more, and then go to the bank after a year and withdraw $100 from my account, so that I now end up with a different $100 bill, it's not clear to me how the first $100 bill was state money but the second one was bank money.
derriz 6y ago
A deposit is not an asset for the bank - it’s a liability - have you ever even looked at the balance sheet of a bank? I even provided a link which demonstrates that deposit accounts are listed as bank liabilities. is There is simply no question on this fact. So to put it simply you’re just wrong. You’re confusing the concept of a deposit with the funds used to create the account. People who don’t understand basic double entry accounting or banking operations often make this mistake - like the author of the original piece.
- the_other 6y ago
  > A deposit is not an asset for the bank - it’s a liability You are repeating the words and ideas of the person you are responding to, yet claiming they have said the opposite and accusing them of not understanding what they wrote. I don’t understand your contribution.
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