Banks create nearly all the money (80%). They do not borrow it to lend.
They do park money in risk-free assets, they're encouraged to diversify from cash, and that's why we had bank runs.
They never had risk management on time, but they DID have the money over time.
Every loan has a credit; the money is always in the system until the debt is paid. When a country is booming, it makes sense not to be restricted by existing money.
Banks are not an intermediary. Take it straight from the BoE; http://www.bankofengland.co.uk/expla...-money-created
other lending sources could be an intermediary. Maybe that's the confusion.
BoE
"Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account."
They do park money in risk-free assets, they're encouraged to diversify from cash, and that's why we had bank runs.
They never had risk management on time, but they DID have the money over time.
Every loan has a credit; the money is always in the system until the debt is paid. When a country is booming, it makes sense not to be restricted by existing money.
Banks are not an intermediary. Take it straight from the BoE; http://www.bankofengland.co.uk/expla...-money-created
other lending sources could be an intermediary. Maybe that's the confusion.
BoE
"Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account."
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