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Banks don’t lend out deposits to they create money that is then eliminated when the debt is paid back. To create money banks need a certain amount of capital t
by dogma1138 5y ago
Banks don’t lend out deposits to they create money that is then eliminated when the debt is paid back.
To create money banks need a certain amount of capital this is governed by capital requirements most of which come from the capital invested into the bank through share purchases.
Many countries have no reserve requirements at all, BOE specifically doesn’t even issue them any longer.
- ChrisLomont 5y ago>Banks don’t lend out deposits Banks do lend out deposits, which is why when they fall below capital reserves as a result, they use the overnight lending facility of the Fed [1] (or similar processes in most countries) to maintain mandatory capital reserves. It leads to data like this [2] which shows the actual amount held by banks versus deposits. [1] https://www.newyorkfed.org/markets/reference-rates/obfr https://www.newyorkfed.org/markets/reference-rates/obfr [2] https://fred.stlouisfed.org/series/M14060USM156NNBR https://fred.stlouisfed.org/series/M14060USM156NNBR