There has been some discussion recently about financial systems on HN, where people were arguing that banks can't just create money, and some myths about reserve requirements and so on.
In the link is the article from Bank of England. It's not me saying it. Straight from a central bank of UK.
On the very first page:
> Whenever a bank makes a loan, simultaneously creates a matching deposit in borrower’s bank account, thereby creating new money.
Later:
> And in the modern economy, those bank deposits are mostly created by commercial banks themselves.
and
> When a bank makes a loan, for example
to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.
> And reserves are, in normal times, supplied ‘on
demand’ by the Bank of England to commercial banks in
exchange for other assets on their balance sheets
In the link is the article from Bank of England. It's not me saying it. Straight from a central bank of UK.
On the very first page:
> Whenever a bank makes a loan, simultaneously creates a matching deposit in borrower’s bank account, thereby creating new money.
Later:
> And in the modern economy, those bank deposits are mostly created by commercial banks themselves.
and
> When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.
> And reserves are, in normal times, supplied ‘on demand’ by the Bank of England to commercial banks in exchange for other assets on their balance sheets
Enjoy the read. If you'd like to venture deeper into the subject, consider watching vidoes with Richard Werner online. One example: https://vimeo.com/142597468?embedded=true&source=video_title...