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If Bob had 100 dollars, he can go about loaning 110$ to other people, making a bet that all of the other persons aren't going to turn up at the same instant and
by billfruit 4y ago
If Bob had 100 dollars, he can go about loaning 110$ to other people, making a bet that all of the other persons aren't going to turn up at the same instant and ask for withdrawals. Then 10$ has been created by Bob without central bank involvement.
- whatshisface 4y agoThat wouldn't have any effect on the money supply unless the other persons actually spend the money they borrowed, so most people wouldn't call that money creation. P.S. usually borrowers spend the money they borrow as quickly as possible because they don't want to make interest payments just so it can sit in an account. That's not where the slack in bank deposits come from. Instead, it comes from people who are saving money.
- JumpCrisscross 4y ago> wouldn't have any effect on the money supply unless the other persons actually spend the money they borrowed It can be spent. That's money.