Pksimon2007
Member
- May 2, 2015
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- #61
- Reserves!
If you deposit a check, the check is an asset. The bank can't use it in any way to service the deposit liability it has assumed.
The bank conceptually swaps the check with the central bank for reserves. The central bank conceptually swaps the check with the issuing bank and takes reserves from their reserve account.
Central bank reserves are an asset to a bank.
- Reserves!
Cool. Back in my original example, I had $10 million in deposits.
Now they sit at the Fed. $1 million is required reserves. $9 million are excess reserves.
I can loan $9 million. $9 million of the deposits I received.
It works with cash deposits too.
- How about we let the Bank of England explain this to you:
"Money creation in practice differs from some popular misconceptions — banks do not act simply
as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’
central bank money to create new loans and deposits."
"
The reality of how money is created today differs from the description found in some economics textbooks:
• Rather than banks receiving deposits when households save and then lending them out, bank lending creates
deposits."
The Fed works in the same way as the BoE, and banking in England works the same way as it does here - and around the world.
Quarterly Bulletin 2014 Q1 Bank of England
- How about we let the Bank of England explain this to you:
It's more fun correcting your errors.
- Oddly, the Bank of England and the Fed have agreed with me on everything so far, and disagreed with you.
Even the article from the Fed WHICH YOU POSTED agreed with me.
So are the Fed and the Bank of England wrong about how they work?
Even the article from the Fed WHICH YOU POSTED agreed with me.
This thread is way too long.
Please show me which portion of a Fed article agreed with which post of yours and disagreed with which post of mine.
So are the Fed and the Bank of England wrong about how they work?
No, just you.
- So far, Todd, you're batting a big fat .000
It might be time to re-read the OP and learn.
Then, the next time you discuss central banking with someone, you'll sound like the genius you want to be, and you'll be able to back up your arguments.
The problem you have in this discussion is that you don't want to know how the system works. You're obviously smart enough to understand. Why would you want to spout stuff that's wrong?