4h • General discussion
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How banks actually create money 👇
Textbooks teach the money multiplier: reserves get lent out and turn into many deposits. The double-entry books do not allow that.
A bank marks up loans (asset) and deposits (liability) at the same time. Loans create deposits.
That is the new money. When the loan is repaid both sides fall and the money is destroyed.
Steve got the repayment part wrong for years until Ravel© forced the correction.
Bernanke in 2009 still talked as if excess reserves would be lent. Modelling that leaves the books unbalanced unless the borrower gets physical cash.
Real system is bank-originated money and debt.
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