It's old school dude. Banks went around the system to enhance their operations. Right now, you are right that loans are created first and deposits are the money on an account of the borrower. The difference is the addition of "bond holding" which is proof for IOU from the borrower. Notice, bond holding is not only the principle but adding in interest. So my understanding is that all banks start with some amount of cash (asset) and cash (equity) to balance out. When someone borrows, banks just imagine the discussed number and poof > there are 2 numbers that appeared out of thin air called loan and reserve. To balance that out, banks put the total of loan + reserve as a deposit on the liability side. There is also something called bond holding to prove that the borrower owes money to the bank both principle and interest. At that point, the borrower's balance sheet will have an amount of cash on the asset side but a bigger number on the liability side because he has to pay interest. So banks have to go through and approve that the borrower is able to pay that interest in the future to issue the loan. In the case of withdrawal. Banks will cancel loan + reserve on the asset side and deposit on the liability side to give borrowers cash. But notice, a bond holding category still appears on the bank's asset to prove that banks have something the borrower is holding temporarily. This is my understanding of credit creation.
Do you mind explaining the difference between capital and reserves? My understanding was that the reserve is capital that the bank is holding onto in house
"the limitation to how much the bank can lend is dictated by the banks’ capital , not reserves" Yup. That's worth repeating. 8 to 12% of capital. It's not based on deposits or reserves. The whole idea of fractional reserve banking and the money multiplier effect was debunked years ago. (And why is YT doubling all posts today?)
No bro the required reserve is the demand deposit. The potential excess reserves is 9 mil $, but you have to acquire assets on the open market. What you calculated would make the required reserve ratio at 55%.
Money out of thin air. The money will never fully return, because it came into 'life' by mortgage or a loan. Why doesn't it come back fully, because you pay interest. Interest and taxes are like 'theft'. Welcome to current slavery. The current monetairy system will hold on as long as it is profitable. Our industry is changing, robots will do more of our work. If robots are doing our work(a robot doesn't earn money) and we don't have the money, the system will collapse. It's just a matter of time. So we have to adapt to the changing world and give people a sort of base income during this transistion period. If not, the system collapses, while people don't have the money to buy the produced goods. Our work will change to more creative jobs. People who can create and program robots/machines. We will have more free time, because machines will do the jobs. Maintaining the machinery will and must go on. It's all about mindset and seeying the whole picture. Next level of evolution of mankind. End of Keynesian economics. We must think in durabillity, renewable energy, clean foods, aquaponics, permaculture, vertical greenhousing, in balance with mother earth.
Deposits don’t create loans. Loans, in fact, create deposits. Also fractional reserve banking hasn’t existed since 1970. This video should be removed. You’re misinforming people.
Hasnt the reserve requirement been eliminated now?
Really funny explanation video... stopped in the middle... probably the electricity stopped or the fraud began...hahaha
Loans are not limited by reserves since credits make deposit and not the converse, via money creation. Official documents explain that.
It's old school dude. Banks went around the system to enhance their operations. Right now, you are right that loans are created first and deposits are the money on an account of the borrower. The difference is the addition of "bond holding" which is proof for IOU from the borrower. Notice, bond holding is not only the principle but adding in interest. So my understanding is that all banks start with some amount of cash (asset) and cash (equity) to balance out. When someone borrows, banks just imagine the discussed number and poof > there are 2 numbers that appeared out of thin air called loan and reserve. To balance that out, banks put the total of loan + reserve as a deposit on the liability side. There is also something called bond holding to prove that the borrower owes money to the bank both principle and interest. At that point, the borrower's balance sheet will have an amount of cash on the asset side but a bigger number on the liability side because he has to pay interest. So banks have to go through and approve that the borrower is able to pay that interest in the future to issue the loan. In the case of withdrawal. Banks will cancel loan + reserve on the asset side and deposit on the liability side to give borrowers cash. But notice, a bond holding category still appears on the bank's asset to prove that banks have something the borrower is holding temporarily. This is my understanding of credit creation.
That's right bro, all videos on youtube on this matter are wrong. I am glad BOE officially published it
5:30 - I believe this is wrong... the limitation to how much the bank can lend is dictated by the banks’ capital , not reserves
Do you mind explaining the difference between capital and reserves? My understanding was that the reserve is capital that the bank is holding onto in house
MRK1sauce The equity. I think that's what he means.
He said required reserve is dictated by the amount of demand deposits available, which is true
"the limitation to how much the bank can lend is dictated by the banks’ capital , not reserves" Yup. That's worth repeating. 8 to 12% of capital. It's not based on deposits or reserves. The whole idea of fractional reserve banking and the money multiplier effect was debunked years ago. (And why is YT doubling all posts today?)
Good info
2:30
Banks don't lend reserves. The way fractional reserve is taught is bad accounting that misunderstands the modern monetary system.
Tnqu sir
5:53 The pyramid scheme of banking and/or fiat.
More!!!!!
i want more videos about science
Banking is science
No bro the required reserve is the demand deposit. The potential excess reserves is 9 mil $, but you have to acquire assets on the open market. What you calculated would make the required reserve ratio at 55%.
thank u🤎
like force and many more.......
5:53 and this, kids, is how you get financial crisis.
I wish SVB watched this video
We all got fooled, game of musical chairs now. Not until we overhaul this value system
mmmm
8th
Fractional reserve banking isn't a thing anymore.
Money out of thin air. The money will never fully return, because it came into 'life' by mortgage or a loan. Why doesn't it come back fully, because you pay interest. Interest and taxes are like 'theft'. Welcome to current slavery. The current monetairy system will hold on as long as it is profitable. Our industry is changing, robots will do more of our work. If robots are doing our work(a robot doesn't earn money) and we don't have the money, the system will collapse. It's just a matter of time. So we have to adapt to the changing world and give people a sort of base income during this transistion period. If not, the system collapses, while people don't have the money to buy the produced goods. Our work will change to more creative jobs. People who can create and program robots/machines. We will have more free time, because machines will do the jobs. Maintaining the machinery will and must go on. It's all about mindset and seeying the whole picture. Next level of evolution of mankind. End of Keynesian economics. We must think in durabillity, renewable energy, clean foods, aquaponics, permaculture, vertical greenhousing, in balance with mother earth.
Deposits don’t create loans. Loans, in fact, create deposits. Also fractional reserve banking hasn’t existed since 1970. This video should be removed. You’re misinforming people.