Comment by neilwilson
1 year ago
And how does that work when the 'required reserve' is zero as it is now, and has been in the rest of the world since time immemorial?
Nobody deposits in a bank - it's just a retag of an existing deposit. The bank Debits a loan account with the amount owed, and Credits a deposit account with the advance. It's a simple balance sheet expansion in double-entry bookkeeping.
I'm really not sure why this myth persists given that central banks debunked the concept over a decade ago.
Loans create deposits, and those deposits are then converted into bank capital when a deposit holder buys bank capital bonds or equity.
[0]: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
Most people deposit in a bank by transferring from another bank. There is more than one bank.
Now do the balance sheet journals for such a transfer. [0]
Then you'll see that for a bank to transfer to another bank the destination bank has to take over the deposit in the source bank (or swap that liability with another bank somewhere).
You have an infinite regress in your thinking.
[0]: https://new-wayland.com/blog/why-banks-pay-interest-on-depos...