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https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence https://www.bankofengland.co.uk/work
by amiga_500 6y ago
https://www.bankofengland.co.uk/working-paper/2018/banks-are-not-intermediaries-of-loanable-funds-facts-theory-and-evidence https://www.bankofengland.co.uk/working-paper/2018/banks-are...
Banks are constrained by demand, they can create credit at will.
- qaq 6y agoNational banks can not commercial banks
- maxerickson 6y agoThe link there is about commercial banks.
- qaq 6y agoThe link above is about economic models for analyzing economic effects. For any actual commercial bank there are very real limits to how much credit they can extend. The models discussed simplify analysis and do not really represent anything particularly meaningful about operation of any particular real world bank.
- amiga_500 6y ago"To avoid misunderstandings, while FMC models reflect the fact that banks face no technical limits to expanding their balance sheets instantaneously and by large amounts, they also reflect the fact that banks face economic limits. However, the latter do not include physical limits such as the availability of sufficient savings. Rather, the most important limits are their own and their customers’ potentially volatile expectations regarding future profitability and solvency"
- qaq 6y agoAgain it's a model to evaluate economic effects and does not represent how any particular commercial bank is operating. It does not account for actual legal frameworks banks are operating under. It's useful as a tool to study the system as a whole same way as some fluid dynamics model is not concerned with each individual molecule.