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At 5%, banks can create 20 times more new money then they hold deposits. Obviously they don't have to go below 0%, as at 0% they are already at inifinity. Als
by globalreset 4y ago
At 5%, banks can create 20 times more new money then they hold deposits.
Obviously they don't have to go below 0%, as at 0% they are already at inifinity.
Also, they don't have to have the reserves when they are lending, they can just borrow the reserves later, which is a huge difference, as just as we've discovered - lending creates money, so you can stuck it up structurally and keep expanding.
- cowthulhu 4y agoThat’s not at all how that works. At 95%, they can lend 95 cents for every dollar on deposit.
- globalreset 4y agoBank A has $100 deposits, Bank B $0. Bank A creates $95 worth of loans, which get deposited to Bank B. Now Bank A has $100 deposits, $5 reserves, $95 loans. Bank B has $95 deposits. Bank B creates $90.25 worth of loans. These loans gets deposited to bank A. Now Bank B has ... $195.25 deposits and is ready to make $85.7375 in loans again...