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As far as I know, that’s not how banks make loans. They don’t lend deposited money, the money they lend is created out of thin air.
by nlitened 5y ago
As far as I know, that’s not how banks make loans. They don’t lend deposited money, the money they lend is created out of thin air.
- oblio 5y agoNo, he's right, that's the theory behind fractional reserve banking. At a 10% bank reserve rate, 10x the monetary base is created.
- spiralx 5y agoExcept fractional reserve banking is an incorrect model of how banks work, the poster you're replying to is correct, banks create money when they make loans. The Bank of England's guide to money creation makes this distinction clear on the first page, it's worth a read, https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...