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That’s not at all how that works. At 95%, they can lend 95 cents for every dollar on deposit.
by cowthulhu 4y ago
That’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...