How is money created?

[Dovahkiin]

Most americans have absolutely no idea.
I wonder what you guys know?

I know exactly how it works.

The part you half-truthers always leave out is how money is destroyed.

Huh? I happily accept that, within a sector, it goes to zero.

 

[Never3ndr]

No, they don't.

Yes, they do.

What makes you think banks lend out deposits

Let's walk through it.

Dovahkiin goes to the bank to borrow $10,000 to buy a car. They have no deposits, because they create a deposit with your loan. You write a check against that deposit account and give it to the car dealer. You drive off with your new car. The dealer deposits the check and it bounces. The dealer sues you and takes back the car. You sue the bank.

Toddsterpatriot goes to the bank to borrow $10,000 to buy a car. They have $100,000 in deposits, because they like their checks to actually clear. My loan creates a deposit and I write a check against that deposit account and give it to the car dealer. I drive off with my new car. The dealer deposits the check and it clears.

Which bank is more likely to be in business next week?

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Honestly, I have an okay (not great, but I'm not totally ignorant either) understanding of money creation and I'm having a hard time following you two.

My understanding is that a bank receives a deposit from a client. The bank then generally keeps a certain % of that deposit stored (based off of laws or the bank's policies) and then seeks to loan out or invest the rest. As an example, let's say Todd deposits $100 in Bank [US]. Bank [US] has a policy of keeping 20% of deposits and looking to loan the rest. Kiin goes to Bank [US] wanting a loan. Bank [US] loans Kiin $80. In this scenario Bank [US] has just created $80 for the economy.

 

[Contumacious]

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Fractional-Reserve Banking is Pure Fraud,

That does nothing to disprove reality. It's simply whining.

So, I take it you are a berner......a socialist?

.

 

[Contumacious]

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Honestly, I have an okay (not great, but I'm not totally ignorant either) understanding of money creation and I'm having a hard time following you two.

My understanding is that a bank receives a deposit from a client. The bank then generally keeps a certain % of that deposit stored (based off of laws or the bank's policies) and then seeks to loan out or invest the rest. As an example, let's say Todd deposits $100 in Bank [US]. Bank [US] has a policy of keeping 20% of deposits and looking to loan the rest. Kiin goes to Bank [US] wanting a loan. Bank [US] loans Kiin $80. In this scenario Bank [US] has just created $80 for the economy.

Fractional-reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, and holds reserves that are afraction of its deposit liabilities.[1] Reserves are held at the bank as currency, or as deposits in the bank's accounts at the central bank. Fractional-reserve banking is the current form of banking practiced in most countries worldwide.[2]

 

[Dovahkiin]

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Honestly, I have an okay (not great, but I'm not totally ignorant either) understanding of money creation and I'm having a hard time following you two.

My understanding is that a bank receives a deposit from a client. The bank then generally keeps a certain % of that deposit stored (based off of laws or the bank's policies) and then seeks to loan out or invest the rest. As an example, let's say Todd deposits $100 in Bank [US]. Bank [US] has a policy of keeping 20% of deposits and looking to loan the rest. Kiin goes to Bank [US] wanting a loan. Bank [US] loans Kiin $80. In this scenario Bank [US] has just created $80 for the economy.

Banks create deposits when they loan.
A good read:
The truth is out: money is just an IOU, and the banks are rolling in it | David Graeber
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans.

Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.

Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:

When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.

The Bank of England said it in the spring of 2014, writing in its quarterly bulletin:

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.

. . . Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

All of which leaves us to wonder: If banks do not lend their depositors’ money, why are they always scrambling to get it? Banks advertise to attract depositors, and they pay interest on the funds. What good are our deposits to the bank?

The answer is that while banks do not need the deposits to create loans, they do need to balance their books; and attracting customer deposits is usually the cheapest way to do it.

 

[Rustic]

Any point in that 29 minute video that tells me who owes me for my $20?
Just give me the time that proves your claim. Thanks!

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

 

[JohnfrmCleveland]

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Honestly, I have an okay (not great, but I'm not totally ignorant either) understanding of money creation and I'm having a hard time following you two.

My understanding is that a bank receives a deposit from a client. The bank then generally keeps a certain % of that deposit stored (based off of laws or the bank's policies) and then seeks to loan out or invest the rest. As an example, let's say Todd deposits $100 in Bank [US]. Bank [US] has a policy of keeping 20% of deposits and looking to loan the rest. Kiin goes to Bank [US] wanting a loan. Bank [US] loans Kiin $80. In this scenario Bank [US] has just created $80 for the economy.

Banks create 100% of the loan, not 90%. For a $1000 loan, the bank creates a $1000 deposit (their liability) and a $1000+ promissory note (their asset). The 10% that you think is set aside is actually just their reserve requirement increasing by $100. And reserve transactions happen within the walls of the Fed - banks never touch those reserves.

Here's where deposits come in: to your bank, they are a cheap source of reserves, nothing more. When you deposit a check (drawn on a different bank) for $150, your bank marks up your account by $150 (a liability to your bank), and the Fed transfers $150 from the other bank's reserve account to your bank's reserve account. Assets = liabilities, and the bank's position doesn't change. But now, because of the deposit, your bank has $135 in excess reserves, and they probably aren't paying you any interest, either.

Without your deposit, the bank could still make the loan; their reserve account doesn't have to be brought up until days later.

 

[Centinel]

Most americans have absolutely no idea.
I wonder what you guys know?
Here's the truth:
- Loans create new money, this shows up in the form of deposits.
- The federal government creates new money through deficit spending. The central bank also plays an important role.

I expect many posters to take an issue with my assertion that Loans create deposits.
Banks do not lend out deposits or multiply up central bank money.

http://www.bankofengland.co.uk/publ...lletin/2014/qb14q1prereleasemoneycreation.pdf

This article explains how the majority of money in the modern economy is created by commercial banks making loans. • 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 amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

That's how things work now, but that doesn't mean that's how they have to work. Before the Federal Reserve was created gold was money. The quantity of money remained fixed except for when new gold deposits were discovered. Under the gold standard the value of the dollar in 1914 was greater than when the Constitution was ratified in 1789. Since that time the value of the dollar has decreased by a factor of 20. A modern dollar is worth only 5% of what an 1914 dollar was worth.

You can be the judge of which system is better.

The quantity of money remained fixed except for when new gold deposits were discovered.

Bank loans under the gold standard also increased the money supply.

No, they merely created more claims to money. They created no more gold.

 

[Centinel]

Any point in that 29 minute video that tells me who owes me for my $20?
Just give me the time that proves your claim. Thanks!

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

Feel free to send all your valueless federal reserve notes to me.

 

[JohnfrmCleveland]

All money is just an IOU...

All money is just an IOU...


I'm holding a $20. Who owes me?

Any point in that 29 minute video that tells me who owes me for my $20?
Just give me the time that proves your claim. Thanks!

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

All money is just an IOU...

All money is just an IOU...


I'm holding a $20. Who owes me?

Any point in that 29 minute video that tells me who owes me for my $20?
Just give me the time that proves your claim. Thanks!

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

You are holding a transferable I.O.U. that was either created through somebody else's loan or by the government. You presumably earned that $20 by your labor; you just haven't bought anything with it yet. So you might say that the economy owes you $20 worth of stuff.

 

[Rustic]

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

Feel free to send all your valueless federal reserve notes to me.

Gullible

 

[Dovahkiin]

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

Feel free to send all your valueless federal reserve notes to me.

I'd like some as well.

 

[Dovahkiin]

Most americans have absolutely no idea.
I wonder what you guys know?
Here's the truth:
- Loans create new money, this shows up in the form of deposits.
- The federal government creates new money through deficit spending. The central bank also plays an important role.

I expect many posters to take an issue with my assertion that Loans create deposits.
Banks do not lend out deposits or multiply up central bank money.

http://www.bankofengland.co.uk/publ...lletin/2014/qb14q1prereleasemoneycreation.pdf

This article explains how the majority of money in the modern economy is created by commercial banks making loans. • 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 amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

On loans, an extremely dumbed down version, but, to my understanding, usually true (given certain conditions).

On deficit spending, kinda true. GOVERNMENT spending can create money by dumping cash into the private sector and letting money multiplier do its magic. As deficit spending is government spending, then yes, it does create money. However, this is not a good scenario. Generally, deficit spending takes resources away from the private sector (if they borrow from within the economy) or creates a situation where the nation is in debt to other nations (which has been known to have toxic effects leading up to war in the past). Deficit spending is toxic and should only be used as a last resort (such as in recent times when the US economy suffered under a recession)...it should not be used as a primary means of generating money (as there are much better means of doing so).

Why is deficit spending a bad scenario? When a bank loans, it creates a deposit matched by an asset. Same for the entity getting the loan. Within the sector, this goes to zero. It's unsustainable to simply run the economy based on bank loans being the only source of money. The government NEEDS to run a net deficit, we've seen what happens when the deficit gets to small or the government sector runs a surplus:
Think big deficits cause recessions

This is the record:

1. 1817-21: In five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.

2. 1823-36: In 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.

3. 1852-57: In six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857..

4. 1867-73: In seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.

5. 1880-93: In 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.

6. 1920-30: In 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.

There have been no such multiyear budget surpluses and debt reductions since World War II and, significantly, no major new depression. The record suggests that reducing the debt never sustained prosperity, even when the debt was virtually wiped out by 1836. The highest deficits were those of world War II, ranging from 20 to 31 percent of Gross National Product. For a few years following the war, the debt was greater than GNP, the only such case in history. The wartime borrowing and spending actually ended the Great Depression.

Post-World War II

Both political parties pledge to balance the budget by 2002, and all budget-balancers hope ultimately to reduce the national debt. In the meantime, the nine recessions of the depression-free postwar decades have each followed reductions in the annual deficits relative to GDP.

Using data developed by Warren B. Mosler, economic analyst for a Florida investment firm, I suggest how some of the recent recessions have been politically significant:

· Deficit reductions, 1971-74, led to the recession that began at the end of 1973; a slow recovery did not help Gerald Ford in 1976.

· Deficit reductions, 1977-80, gave way to a recession in 1980 that damaged Jimmy Carter’s re-election hopes.

· Deficit reductions, 1987-89, were followed by the 1990-91 recession that harmed George Bush.

Meanwhile, the longest period without a recession was from November, 1982 to July, 1990.

The Republicans who now praise that "Reagan boom" never refer to the deficits or blame the Democratic Congress, while Democrats repeatedly attack "Reagan deficits." Neither side seems aware that a steep rise in deficits began in 1981, preceding the "boom" by almost two years.

When deficit reductions finally began in 1987, they paved the way for the next recession. Political irony is everywhere.

When the economy slides downhill, the incumbent president is badly damaged, and it does him little good to proclaim "success" in reducing deficits.

Ronald Reagan suffered no political harm because of the deficits of the 1980s and, even at his advanced age, might have been elected again in 1988 if he had been permitted to run. Whatever citizens say to pollsters, they vote against recessions, not budget deficits.

Driven by what appears to be wholly fallacious economic principles, politicians have put together such monstrosities as the Gramm-Rudman-Hollins deficit-reduction policy and the more recent "zero-sum budgeting" (all new programs must be financed by cuts in existing programs), along with the Clinton administration’s "reinvention of government" ("downsizing") to virtually guarantee a new economic disaster, perhaps more serious than any in recent decades.

Why does deficit spending take away resources? Deficit spending by definition is spending past tax receipts, adding net financial assets to the private sector. The only way deficit spending "takes from the private sector" is if the private sector is booming, if we're at low unemployment, etc, etc... Did the recent stimulus really take anything? Of course not, it helped the private sector. We're not "in debt" to other nations. Here's what happens: China has an account at the fed (call this a checking account) and they earn us dollars trading with us (we're only a reserve currency thanks to our imports exceeding exports.) They decide they want a tiny bit of interest on these EARNED DOLLARS. So they move some over into treasury securities (savings) and when the time comes, we simply delete the numbers from their savings and re-add it to their checking. Virtually none of this money will re-enter the economy, and if it does, what are they going to do? It's in us dollars. Convert it? To what? The euro? Yeah, sure... They could spend some of it.. err, ok, that only helps us. Deficits/surpluses should be viewed as policy tools, with the reality being us running a net deficit.

 

[Toddsterpatriot]

No, they don't.

Yes, they do.

What makes you think banks lend out deposits

Let's walk through it.

Dovahkiin goes to the bank to borrow $10,000 to buy a car. They have no deposits, because they create a deposit with your loan. You write a check against that deposit account and give it to the car dealer. You drive off with your new car. The dealer deposits the check and it bounces. The dealer sues you and takes back the car. You sue the bank.

Toddsterpatriot goes to the bank to borrow $10,000 to buy a car. They have $100,000 in deposits, because they like their checks to actually clear. My loan creates a deposit and I write a check against that deposit account and give it to the car dealer. I drive off with my new car. The dealer deposits the check and it clears.

Which bank is more likely to be in business next week?

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

You didn't explain how the check clears.

 

[Toddsterpatriot]

No, they don't.

Yes, they do.

What makes you think banks lend out deposits

Let's walk through it.

Dovahkiin goes to the bank to borrow $10,000 to buy a car. They have no deposits, because they create a deposit with your loan. You write a check against that deposit account and give it to the car dealer. You drive off with your new car. The dealer deposits the check and it bounces. The dealer sues you and takes back the car. You sue the bank.

Toddsterpatriot goes to the bank to borrow $10,000 to buy a car. They have $100,000 in deposits, because they like their checks to actually clear. My loan creates a deposit and I write a check against that deposit account and give it to the car dealer. I drive off with my new car. The dealer deposits the check and it clears.

Which bank is more likely to be in business next week?

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

It doesn't, because a bank that isn't lending doesn't have anyone going to it for loans.
This should be common sense.

It doesn't

I agree, it doesn't remain in business.

a bank that isn't lending doesn't have anyone going to it for loans.

Your bank did lend to you. $10,000 for your car purchase. Did you forget already?

You're all over the place. Notice how you fail to provide evidence that deposits create loans.

Notice how you fail to provide evidence that deposits create loans.

Deposits don't create loans, deposits give banks the money they need to clear loan checks.

 

[Dovahkiin]

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

You didn't explain how the check clears.

If their isn't enough money in Billy's deposit, which Billy does indeed draw from, of course the check isn't going to clear. Now, how did billy's deposit get their in the first place?

 

[Dovahkiin]

That has nothing to do with banks LENDING OUT DEPOSITS. Banks do not lend out deposits, your example doesn't show that at all.

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

It doesn't, because a bank that isn't lending doesn't have anyone going to it for loans.
This should be common sense.

It doesn't

I agree, it doesn't remain in business.

a bank that isn't lending doesn't have anyone going to it for loans.

Your bank did lend to you. $10,000 for your car purchase. Did you forget already?

You're all over the place. Notice how you fail to provide evidence that deposits create loans.

Notice how you fail to provide evidence that deposits create loans.

Deposits don't create loans, deposits give banks the money they need to clear loan checks.

Deposits are used to balance the books and attract customers. Banks don't want to hold deposits in large amounts, it's a liability.

 

[Contumacious]

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

Feel free to send all your valueless federal reserve notes to me.

The U.S. Dollar: Currency Masquerading as Money
By Donald W. Miller, Jr., MD


People consider Federal Reserve notes, U.S. dollars, to be real money. This includes their digital equivalent in bank and credit card statements and Treasury-issued base metal coins. As a unit of account, all goods and services, and land and labor are priced in U.S. dollars. Declared legal tender, Federal Reserve notes are the country’s medium of exchange.

 

[Toddsterpatriot]

Banks do not lend out deposits

How long does the lending bank remain in business with $0 deposits?

Todd, does a bank take from its deposits to loan?

Todd, does a bank take from its deposits to loan?

Where else would the money come from to clear the check?

Jesus. Loans create deposits. Your entire argument isn't even attacking that.

Honestly, I have an okay (not great, but I'm not totally ignorant either) understanding of money creation and I'm having a hard time following you two.

My understanding is that a bank receives a deposit from a client. The bank then generally keeps a certain % of that deposit stored (based off of laws or the bank's policies) and then seeks to loan out or invest the rest. As an example, let's say Todd deposits $100 in Bank [US]. Bank [US] has a policy of keeping 20% of deposits and looking to loan the rest. Kiin goes to Bank [US] wanting a loan. Bank [US] loans Kiin $80. In this scenario Bank [US] has just created $80 for the economy.

Banks create deposits when they loan.
A good read:
The truth is out: money is just an IOU, and the banks are rolling in it | David Graeber
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans.

Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.

Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:

When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.

The Bank of England said it in the spring of 2014, writing in its quarterly bulletin:

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.

. . . Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

All of which leaves us to wonder: If banks do not lend their depositors’ money, why are they always scrambling to get it? Banks advertise to attract depositors, and they pay interest on the funds. What good are our deposits to the bank?

The answer is that while banks do not need the deposits to create loans, they do need to balance their books; and attracting customer deposits is usually the cheapest way to do it.

Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans.

Ellen Brown is a moron. Your use of her as a source is perfect.

When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.


Yes. And when the borrower tries to use that money, whether by withdrawing currency at the lending bank or writing a check against their new deposit account, the bank better have access to deposits, if it doesn't want the check to bounce.

 

[Toddsterpatriot]

Any point in that 29 minute video that tells me who owes me for my $20?
Just give me the time that proves your claim. Thanks!

Money is just an IOU… That simple. The US treasury, the federal reserve and US government have no money. The federal debt is far too large for the federal government to have any assets.

Money is just an IOU… That simple.

I saw that claim the first time you posted it. So who owes me for this $20 FRN I'm holding?

The federal government robs Peter to pay Paul = our currency... It's just an exchange of IOUs

Yeah, the government sucks.
You still haven't answered my question.

Printed paper has no value... It's an IOU. LOL

Printed paper has no value...

So you say.

It's an IOU.

Cool. Who owes me?