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Old 31-10-2017, 09:58 PM
Skintagain Skintagain is online now
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Quote:
Originally Posted by cdm61 View Post
What are you trying to say here? And its not me - its the Bank of England's explanation of modern money creation.

What us commies and some libertarian economists are saying is that banks should be the model you think they are. Which is two functions.

1. They provide a transaction account for your everyday needs
2. They provide a deposit account for savers on which they pay interest

The risk to the saver is the bank has to find investment opportunities for your money - it can't create new money for the products it uses to make profits - ie loans and mortgages.

So in this model the bank does not create new money when it makes loans - it uses your money.

This is called 100% reserve banking - ie for every 1 it lends it must have a 1 on deposit.
Again, I'm lost so if someone put in 100, you can only lend 50? Isn't that a bit restrictive. Wouldn't there be a massive economic slow down due to lack of lending?
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