How is money created?

[Rustic]

So-called money is just a number in the computer, in other words an IOU... Lol

So-called money is just a number in the computer, in other words an IOU.

Before we get to deposit accounts, I want to clear up your claim about FRNs.

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt?? That means there's nothing backing the printed paper. Lol

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt??

What a ridiculous misunderstanding of assets and liabilities. You never took an accounting class, obviously.

This country alone has most likely 225+ trillion in debt, Assets a fraction of that... Lol

If I lent you $1000, how would that change our combined assets and liabilities?

The worlds answer to assets and liabilities - is robbing Peter to pay Paul, all money is an IOU… LOL

 

[Toddsterpatriot]

So-called money is just a number in the computer, in other words an IOU.

Before we get to deposit accounts, I want to clear up your claim about FRNs.

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt?? That means there's nothing backing the printed paper. Lol

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt??

What a ridiculous misunderstanding of assets and liabilities. You never took an accounting class, obviously.

This country alone has most likely 225+ trillion in debt, Assets a fraction of that... Lol

If I lent you $1000, how would that change our combined assets and liabilities?

The worlds answer to assets and liabilities - is robbing Peter to pay Paul, all money is an IOU… LOL

I didn't rob the bank when I took out a mortgage.

 

[Rustic]

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt?? That means there's nothing backing the printed paper. Lol

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt??

What a ridiculous misunderstanding of assets and liabilities. You never took an accounting class, obviously.

This country alone has most likely 225+ trillion in debt, Assets a fraction of that... Lol

If I lent you $1000, how would that change our combined assets and liabilities?

The worlds answer to assets and liabilities - is robbing Peter to pay Paul, all money is an IOU… LOL

I didn't rob the bank when I took out a mortgage.

You also don't own that property until the last cent paid, and banks only deal in IOUs... Lol

 

[Dovahkiin]

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.

I suppose Robert B Anderson and the bank of england, along with warren mosler and many others are all morons.
You are not even arguing with the way money is created. LOANS CREATE DEPOSITS. Of course the the borrower needs to access his own fucking deposit.

 

[Dovahkiin]

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.

And reserve transactions happen within the walls of the Fed - banks never touch those reserves.

Banks touch reserves all the time.

Hardly.

 

[Dovahkiin]

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?

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.

You said Billy borrowed $10,000. So they created a deposit account for Billy of $10,000.
How can there not be enough money in Billy's deposit for him to withdraw $10,000?

Yes, they did indeed create a deposit account for $10000.
In your scenario, when the check doesn't clear, their obviously isn't enough in his deposit. Notice how we're not even arguing that LOANS CREATE THE DEPOSITS.

 

[Dovahkiin]

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.

Deposits are used to balance the books and attract customers.

A loan creates a deposit. Sounds like the books already balance.
Why would they need a second deposit?

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

 

[Dovahkiin]

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.

A simple, hypothetical example will illustrate the principal of insanity that is the basis of our current monetary system.

Suppose JPMorgan holds $1 billion in total deposits. In the original form of our fractional-reserve fraud, the fraud ratio was set at 10:1. This meant that for every dollar that a bank actually held, it was allowed to “lend” $10. Now for the simple arithmetic.

JPMorgan is holding $1 billion of other peoples’ property, but it is allowed to “lend” a total of $10 billion. Where does the other $9 billion come from? It is conjured out of thin air via fractional-reserve fraud. Thus, for many readers, this represents their first actual glimpse of the full scope of fraudulence of our current monetary system.

JPMorgan is holding $1 billion of other peoples’ property, but it is allowed to “lend” a total of $10 billion. Where does the other $9 billion come from?

You are mistaken. With only $1 billion in deposits, JPMorgan can loan out a maximum of $1 billion.
Every loan is fully funded. With a 10% reserve requirement, $10 billion in total deposits (or deposits plus other borrowings) could support $9 billion in loans.

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

 

[Toddsterpatriot]

You do know there is not enough assets in this country or in the world to even coming close to covering this country's or the worlds debt??

What a ridiculous misunderstanding of assets and liabilities. You never took an accounting class, obviously.

This country alone has most likely 225+ trillion in debt, Assets a fraction of that... Lol

If I lent you $1000, how would that change our combined assets and liabilities?

The worlds answer to assets and liabilities - is robbing Peter to pay Paul, all money is an IOU… LOL

I didn't rob the bank when I took out a mortgage.

You also don't own that property until the last cent paid, and banks only deal in IOUs... Lol

You also don't own that property until the last cent paid

Wow, that's interesting. Still doesn't change the fact that debt is not owed to a hole in the sky.
Debt is never higher than assets.

 

[Toddsterpatriot]

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.

I suppose Robert B Anderson and the bank of england, along with warren mosler and many others are all morons.
You are not even arguing with the way money is created. LOANS CREATE DEPOSITS. Of course the the borrower needs to access his own fucking deposit.

You are not even arguing with the way money is created.

Money is created, mostly, when banks make loans.

LOANS CREATE DEPOSITS.

Yes. And?

Of course the the borrower needs to access his own fucking deposit.

We agree. So the bank with no deposits makes the $10,000 loan to Billy.
How does Billy get FRNs or write a check against his account?

 

[Toddsterpatriot]

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?

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.

You said Billy borrowed $10,000. So they created a deposit account for Billy of $10,000.
How can there not be enough money in Billy's deposit for him to withdraw $10,000?

Yes, they did indeed create a deposit account for $10000.
In your scenario, when the check doesn't clear, their obviously isn't enough in his deposit. Notice how we're not even arguing that LOANS CREATE THE DEPOSITS.

In your scenario, when the check doesn't clear, their obviously isn't enough in his deposit.

You're contradicting your previous claims.
Billy took out a loan of $10,000. The bank creates a deposit account for Billy of $10,000.
Billy writes a check for $10,000. The check recipient deposits it in another bank. The check bounces.
Why?

Notice how we're not even arguing that LOANS CREATE THE DEPOSITS.

Notice you aren't explaining why Billy's loan requires additional deposits to clear.

 

[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.

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

 

[Toddsterpatriot]

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.

Deposits are used to balance the books and attract customers.

A loan creates a deposit. Sounds like the books already balance.
Why would they need a second deposit?

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

Why don't you cut and paste the portion of that bulletin that you feel refutes anything I've said?
Maybe if there is something that says banks don't need deposits to clear checks?

 

[Toddsterpatriot]

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

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.

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

And yet, they still manage to increase the money supply.

 

[Centinel]

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.

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

And yet, they still manage to increase the money supply.

No they don't. The number of FRNs remains the same. Just as, when gold was money, total amount of gold remained the same.

 

[Iceweasel]

LOANS CREATE DEPOSITS.

Wrong. Deposits create deposits. A loan doesn't mean all or any will be payed back, that's why the determine the risk, and collateral first.

What are you trying to prove?

 

[Toddsterpatriot]

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.

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

And yet, they still manage to increase the money supply.

No they don't. The number of FRNs remains the same. Just as, when gold was money, total amount of gold remained the same.

No they don't. The number of FRNs remains the same.

They do increase the money supply. I never said the number of FRNs changed.
You realize the money supply is much more than the number of FRNs, don't you?

 

[Centinel]

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

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

And yet, they still manage to increase the money supply.

No they don't. The number of FRNs remains the same. Just as, when gold was money, total amount of gold remained the same.

No they don't. The number of FRNs remains the same.

They do increase the money supply. I never said the number of FRNs changed.
You realize the money supply is much more than the number of FRNs, don't you?

You mean like it was more the total amount of gold when gold was money?

 

[JohnfrmCleveland]

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.

And reserve transactions happen within the walls of the Fed - banks never touch those reserves.

Banks touch reserves all the time.

Not the ones in Fed accounts. Banks can exchange reserves for vault cash and vice versa, that's it.

 

[Toddsterpatriot]

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

Bank loans increased the money supply, they did not increase the gold supply.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

They simply increase the number of claims on the same amount of FRNs.

Bank loans don't increase the supply of gold, and they don't increase the supply of FRNs.

And yet, they still manage to increase the money supply.

No they don't. The number of FRNs remains the same. Just as, when gold was money, total amount of gold remained the same.

No they don't. The number of FRNs remains the same.

They do increase the money supply. I never said the number of FRNs changed.
You realize the money supply is much more than the number of FRNs, don't you?

You mean like it was more the total amount of gold when gold was money?

Of course the money supply was more than just the gold supply.
What are the parts of money supply? Do you know?