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Similar assertion (i.e., money is created by commercial banks) is made in this book too [1]. It is in the context of working of The Federal Reserve. The author
by vishnugupta 5y ago
Similar assertion (i.e., money is created by commercial banks) is made in this book too [1]. It is in the context of working of The Federal Reserve. The author worked is a former fed trader.
> the deposit created is taken, sent elsewhere and reduces a loan somewhere.
Sure, but that doesn't imply the converse (i.e., a loan is made from deposit), does it?
> they all have over a trillion dollars of deposits at 10-15 bps which they then lend at a few %.
It is not clear (to me at least) if the money they lent out is indeed from the deposits they took.
[1] https://www.goodreads.com/book/show/56863052-central-banking-101 https://www.goodreads.com/book/show/56863052-central-banking...
- danielmarkbruce 5y ago"money is created" doesn't mean what you think it means. The definition of "money' used by central bankers isn't the same definition which is used by regular folks in a common sense manner. Take a look at the balance sheet of any of the big public banks. The assets on their books (mostly loans) has to add up to the equity on their books + liabilities (mostly deposits). If they didn't have all those deposits, what would they use to plug the hole? They could borrow money from elsewhere, but it would be more expensive and less sticky.