6 ms·
The create money by loaning out many times the amount of deposits they have.
by hughw 4y ago
The create money by loaning out many times the amount of deposits they have.
- phkahler 4y agoNo. Less than their total deposires. But loaned money may well end up in a bank where it might be loaned out again. But it's not IMHO right to try to claim one deposite as somehow "the first one" that gets loaned out repeatedly. Each deposit is loaned out less than 100 percent. The bottom line is that not all deposited money is not readily available on short notice.
- hughw 4y agoIf you deposit $1000 in a bank, and if the reserve requirement is 10%, the bank can lend out $10,000 to a borrower. It gives the borrower a bank account with a $10,000 balance. It has created $9000 of money out of thin air.