Brian

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      Brian commented  · 

      Those who claim banks do create money out of thin air expalin as follows:

      Let’s look at what typically happens, in double entry bookkeeping terms, when a bank issues a loan for 300k. Initially, it creates a asset liability pair of 300k in its own accounts. (300k,300k) (assets liability) The customer receives the 300k but also has a liability of 300k to repay the bank. The bank acquires an asset of 300k in the form of a loan but still retains 300k in liabilities in terms of its own issued IOUs.

      So the bank still have (300k,300k), the borrower has (300k,300k).

      This all nets to zero and, as can be seen there is no new equity created from the bank lending, but the borrower does have 300k of available liquidity. ...

      https://petermartin2001.wordpress.com/2014/03/05/can-commercial-banks-create-money-out-of-thin-air-3-the-creation-of-money-by-private-banks-in-the-process-of-lending-leads-only-to-the-removal-of-money-from-the-economy/

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    • 17 votes
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