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If you deposit $100 at a bank then you will receive a $100 bank account. That account is the additional money. It remains money whether or not the bank lends ou
by cchooper 18y ago
If you deposit $100 at a bank then you will receive a $100 bank account. That account is the additional money. It remains money whether or not the bank lends out your original $100. So the money is created in the act of depositing, not the act of lending.
- j2d2 18y agoIf the bank doesn't lend, no additional money is created. They could just hold on to it.
- cchooper 18y agoWhether they hold onto it or not is irrelevant. If a company issues a bond, but doesn't spend the money it has been loaned, the bond still exists. If the bank issues you with a current account, but doesn't spend the money you loaned it, the current account still exists. The current account is the new money. It exists. You could spend it by transferring it and yet the bank still has the original $100.
- j2d2 18y agoI stand by what I've said thus far and am finished.
- astine 18y agoIf my company deposits a sun at a bank, my accountants will treat the deposit as an asset. If I then take out a loan from the same bank, that 'new' money is then treated as an asset. Companies and banks can trade on these 'assets,' in the form of stocks and bonds. In this way, the same money can be treated as an asset several times and the money supply, in the form of credit, can be effectively expanded. Reputable banks wouldn't allow this, but it's completely legal.
- cchooper 18y agoThe way your accountants record your assets makes no difference to the money supply. That is a completely separate issue.