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Banks don’t borrow from depositors. Loans create deposits and the deposits just change ownership tag from then on.
by neilwilson 3y ago
Banks don’t borrow from depositors.
Loans create deposits and the deposits just change ownership tag from then on.
- kqr 3y agoI mean, they do, to the extent that people walk into banks and hand over wads of cash for deposit. I.e. it happens, but increasingly rarely.
- neilwilson 3y agoHow did you get the wad of cash in the first place and what is it? A wad of cash isn’t money. It is nothing more than a receipt for a deposit held at an institution somewhere - that was created as an advance in the past in response to an equivalent loan. When you deposit a wad of cash in a bank, the bank takes ownership of the deposit in the institution and creates a new deposit in the bank for you. It’s just another loan creating a deposit.
- tomatocracy 3y agoA deposit is literally you lending money to your bank, payable on demand.
- neilwilson 3y agoThat’s not the point. The point is where what you have came from in the first place. A loan creates an advance. That advance is the bank owing a person in return for the person owing the bank. The advance is then used to pay you so you have a deposit. All that does is change the ownership tag on the advance.