Re: Sensible question on this idea of banks inventing money ala The FED


exactly though - in the real world its bound to be a different bank

i can see the angle of the whole bigger picture but in that example some
funds must be used






"Ronald Raygun" <no.spam@xxxxxxxxxxxxxxxxxxxxx> wrote in message
news:LQ%5j.58955$c_1.20817@xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
decmber wrote:

Sensible question on this idea of banks inventing money ala The FED

e.g. - pick a UK bank , say Lloyds for instance

you get a loan of 10k from them

you then write a cheq for the 10k to buy a car

someone will present that cheq and 10k will be transferred

so something must be there for this to happen ?

when banks credit your account in this circumstance dont they have to
transfer funds from reserves to your account ?

No. Your account doesn't contain funds, only booking entries.
If the person you buy the car from deposits your cheque in his
account, and it is with the same bank as yours, then no funds
transfer takes place at all. Only an accounting entry to debit
your account and credit his.

If he banks with a different bank, then there will (in due course)
be a funds transfer from your bank to his.



.

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