[Conversation starter] Where do banks get the money they lend to people in the private sector?

[Econ4Every1]

No, what you need to do is not be a condescending ass. The majority of posters here are as educated, or of higher education level, than you. Yours is not a limitation of media used to convey ideas. Yours is a limitation of YOU, and your belief that you are smarter than everyone else. Thus, you are by nature, a condescending ass.

All that you perceive none of that is what I've stated.

Ahhhh, but it is dear boy, it is. I am one of those who is better educated than you, and I have been dealing with people like you for longer than you've been alive. There is what is stated, and there is what is implied, and I can read your implied thoughts quite easily.

The fact remains that without the initial deposit the bank can't engage in their fractional reserve banking BS. You are ignoring the root of the tree to make a point. One that you apparently don't understand very well.

You sound really insecure touting your education like high school kids might talk about the size of the penis'. Seriously?

Look, I apologized to you and said I was sorry. Then you went on some tirade prescribing to me intentions and motives, none of which you can substantiate. It's obvious you have the problem. I suggest you put me on ignore if you can't handle debate.

No, I am quite secure in my education and have dealt with silly people who thought real highly of themselves for decades, like I said. I don't put people on ignore because they are condescending, hell, I don't place people on ignore for anything. Even the ones who are simple idiots sometimes amuse me. But, to your "point", you have dodged Todds observations and instead responded with pithy propaganda.

If you wish to have a conversation and impress people with how clever you are I suggest you actually address the points with facts, and not with opinions or propaganda.

Propaganda? Please, enlighten me, what have I posted that is propaganda?

And tell me what Todd has posted that I have ignored. I've answered everything he's asked.

 

[Econ4Every1]

The bank records an asset on their books when they make a loan.

No, a bank records an asset and a liability on their books when they create a loan.

When I make a deposit, the bank has a liability payable to me.

Yes, it's a liability in that they must repay you on demand, but it's also an asset because they can lend your deposits within the banking system. You've already acknowledged this. Deposits are reserves and reserves are assets.

When they create money out of thin air, they have a liability payable to thin air?

They have a liability recorded on their books that must be repaid.

Let's say you make a promise to help your neighbor paint his house. Where did you get the promise? Did you pull it out of a drawer of promises? No, you have the capability of fulfilling that promise, but the fact remains that you are negative that promise. You owe someone something Something you didn't have. When you paint your neighbor's house, you aren't positive one house painting, you have fulfilled your promise and owe nothing.

A promissory note is a promise. The borrower promises to repay the loan and the bank has an obligation, a promise to repay the debt it created with the money the borrower repays. When the debt is repaid, the bank doesn't have the money it lent, that returns to zero. What the bank keeps is the interest.

Perhaps you need to study up on double entry accounting?

I'd be happy to illustrate it for you if you'd like?

 

[Toddsterpatriot]

The bank records an asset on their books when they make a loan.

No, a bank records an asset and a liability on their books when they create a loan.

When I make a deposit, the bank has a liability payable to me.

Yes, it's a liability in that they must repay you on demand, but it's also an asset because they can lend your deposits within the banking system. You've already acknowledged this. Deposits are reserves and reserves are assets.

When they create money out of thin air, they have a liability payable to thin air?

They have a liability recorded on their books that must be repaid.

Let's say you make a promise to help your neighbor paint his house. Where did you get the promise? Did you pull it out of a drawer of promises? No, you have the capability of fulfilling that promise, but the fact remains that you are negative that promise. You owe someone something Something you didn't have. When you paint your neighbor's house, you aren't positive one house painting, you have fulfilled your promise and owe nothing.

A promissory note is a promise. The borrower promises to repay the loan and the bank has an obligation, a promise to repay the debt it created with the money the borrower repays. When the debt is repaid, the bank doesn't have the money it lent, that returns to zero. What the bank keeps is the interest.

Perhaps you need to study up on double entry accounting?

I'd be happy to illustrate it for you if you'd like?

No, a bank records an asset and a liability on their books when they create a loan.

You said the loan was the liability. Glad you've realized your mistake.

Yes, it's a liability in that they must repay you on demand,

Yes. Now who must they repay for this "out of thin air" money they've created?
This money is an asset, where is the offsetting liability?
This new liability is owed to ..................?

Let's say you make a promise to help your neighbor paint his house. Where did you get the promise?

Let's remain in the realm of finance.

 

[Toddsterpatriot]

The bank records an asset on their books when they make a loan.

No, a bank records an asset and a liability on their books when they create a loan.

When I make a deposit, the bank has a liability payable to me.

Yes, it's a liability in that they must repay you on demand, but it's also an asset because they can lend your deposits within the banking system. You've already acknowledged this. Deposits are reserves and reserves are assets.

When they create money out of thin air, they have a liability payable to thin air?

They have a liability recorded on their books that must be repaid.

Let's say you make a promise to help your neighbor paint his house. Where did you get the promise? Did you pull it out of a drawer of promises? No, you have the capability of fulfilling that promise, but the fact remains that you are negative that promise. You owe someone something Something you didn't have. When you paint your neighbor's house, you aren't positive one house painting, you have fulfilled your promise and owe nothing.

A promissory note is a promise. The borrower promises to repay the loan and the bank has an obligation, a promise to repay the debt it created with the money the borrower repays. When the debt is repaid, the bank doesn't have the money it lent, that returns to zero. What the bank keeps is the interest.

Perhaps you need to study up on double entry accounting?

I'd be happy to illustrate it for you if you'd like?

A promissory note is a promise.

Yup.

The borrower promises to repay the loan

Yes, the customer must repay his loan.

and the bank has an obligation, a promise to repay the debt it created with the money the borrower repays.

The bank has to repay the loan that the customer is repaying?
Or is the bank repaying a loan to thin air?
This attempt of yours is really confusing.

 

[Indeependent]

I for one am enjoying this back and forth.

 

[Econ4Every1]

Absolutely correct, but the reserves are transferred between banks accounts at the Fed.
Reserves leave a bank when they make a loan or return a deposit. Correct?

[/quote]

No, I explained that the money a bank creates isn't from reserves, it's created on the balance sheet of the bank. The bank must secure adequate reserves after the fact (if reserves are required).

The reason it's done after the fact is that banks settle up at the end of each day, so when they are making loans and satisfying withdrawals they may not know if they will need more reserves or if they will have an excess. At least that's how it was up through the 1990's. Obviously, banking happens at a faster more informed pace today, which is why banks no longer close at 2. They stay open later because the settlement process happens more quickly. The process is still basically the same though.

When a person makes a deposit in a non-cash form (checks ect) all that happens at the end of each day is banks all settle out aggregate payments. Any bank that has more deposits than payments has additional reserves, any bank that has more payments than deposits has reduced reserves.

When cash is deposited, it's either held in the vault or, if the bank has adequate vault cash, the bank swaps physical cash for reserves at the Fed. It's just the opposite of acquiring physical cash.

Banks do not transfer physical cash between different bank entities.

The Fed only pays interest on excess reserves (do you dispute this?).

I do. The Fed pays interest on all reserves.

You are correct

Right. You said banks don't make loans from deposits, I said they do.

What I said is that banks don't fund loans from reserves (deposits). You disagree. I posted at least 4 separate sources, A paper Written by the Cheif economist at Standard and Poors, the Bank of England, a paper that tested the idea empirically and an article from Forbes.

You linked to an article that supports the Austrian point-of-view. I could post lots of articles written by people that share my economic viewpoint, but I don't post those as I expect you won't accept them as authoritative. So I post articles from varied points of view. Now I admit, the Forbes article was written by an academic (so it has a bit more of a slant), but I like that one because he lays it out, in a graph, using double entry accounting. It's pretty iron clad.

Loans (more precisely) aren't

funded from reserves

What are loans funded from?

The balance sheets of the banks that create them.

To sell you a $200,000 mortgage a new bank (with no deposits) could, as I said, create the loan out of thin air and acquire the necessary reserves after the fact via the interbank market (borrowing other banks excess reserves).

These excess reserves that your bank borrows.......why does the other bank have them?
Where did the other bank get them from?

The Fed is the lender of last resort and it sets reserves requirements. If there were no reserves the Fed could supply them.

Of course, we both know the economy didn't start out as fiat so there was already money in circulation in the banks when the fiat standard began.

So why would banks have money? Because people have the desire to save.

So my bank now has a $200k liability and a $200k asset plus interest. That night it goes on the interbank market and borrows the necessary reserves, in this case, $2000.

Why do you have a $200k liability? Remember, you have no deposits.

Deposits aren't the only form of liability. The bank created $200k from nothing and recorded that liability on its books. Bank regs require that money be repaid, thus it is a liability that the bank is ultimately responsible for. The bank uses the borrower's payment to repay its obligation, however, if the borrower fails to meet their obligation, the money would come from the repossession of collateral or the bank's profits.

 

[Econ4Every1]

The bank has to repay the loan that the customer is repaying?
Or is the bank repaying a loan to thin air?
This attempt of yours is really confusing.

Let me ask you if you believe that the bank loans customer deposits to other customers if the borrower defaults, what happens then?

 

[Econ4Every1]

My sister actually works for the Fed, this guy has no idea what he's talking about.

Maybe she could join the conversation?

Oh, and Paul Sheard disagrees with your sister.

Paul's qualifications:

Paul Sheard was named Chief Global Economist and Head of Global Economics and Research for S&P Global Ratings in June 2012. Paul leads a team of over 50 economists, researchers and quantitative analysts responsible for the macroeconomic forecasts used by S&P Global Ratings analysts during the ratings process, critical cross-sector research projects and ratings performance reporting.

Previously, Paul had been Global Chief Economist and Head of Economic Research at Nomura Securities. There, he led a team of 35 economists in seven countries and was responsible for the firm’s global economic forecasts, outlooks and analyses.

Earlier in his career, Paul spent eight years at Lehman Brothers where he held a similar position and also served as Asia Chief Economist. Before that, Paul was Head of Japan Equity Investments at Baring Asset Management. He has held faculty positions at Osaka University and the Australian National University, and visiting positions at Stanford University and the Bank of Japan.

Paul is the author of several books and articles on corporate governance and the Japanese economy. His book, The Crisis of Main Bank Capitalism (Toyo Keizai Shinposha), earned him the Suntory-Gakugei Prize in the Economics–Politics Division. He was a member of the World Economic Forum Global Agenda Council on the International Monetary System in 2010-12.

Paul received his bachelor’s degree from Monash University in Australia, a master’s degree in Economics and a Ph.D. from the Australian National University.

What does your sister do?

 

[Toddsterpatriot]

Absolutely correct, but the reserves are transferred between banks accounts at the Fed.
Reserves leave a bank when they make a loan or return a deposit. Correct?

No, I explained that the money a bank creates isn't from reserves, it's created on the balance sheet of the bank. The bank must secure adequate reserves after the fact (if reserves are required).

The reason it's done after the fact is that banks settle up at the end of each day, so when they are making loans and satisfying withdrawals they may not know if they will need more reserves or if they will have an excess. At least that's how it was up through the 1990's. Obviously, banking happens at a faster more informed pace today, which is why banks no longer close at 2. They stay open later because the settlement process happens more quickly. The process is still basically the same though.

When a person makes a deposit in a non-cash form (checks ect) all that happens at the end of each day is banks all settle out aggregate payments. Any bank that has more deposits than payments has additional reserves, any bank that has more payments than deposits has reduced reserves.

When cash is deposited, it's either held in the vault or, if the bank has adequate vault cash, the bank swaps physical cash for reserves at the Fed. It's just the opposite of acquiring physical cash.

Banks do not transfer physical cash between different bank entities.

The Fed only pays interest on excess reserves (do you dispute this?).

I do. The Fed pays interest on all reserves.

You are correct

Right. You said banks don't make loans from deposits, I said they do.

What I said is that banks don't fund loans from reserves (deposits). You disagree. I posted at least 4 separate sources, A paper Written by the Cheif economist at Standard and Poors, the Bank of England, a paper that tested the idea empirically and an article from Forbes.

You linked to an article that supports the Austrian point-of-view. I could post lots of articles written by people that share my economic viewpoint, but I don't post those as I expect you won't accept them as authoritative. So I post articles from varied points of view. Now I admit, the Forbes article was written by an academic (so it has a bit more of a slant), but I like that one because he lays it out, in a graph, using double entry accounting. It's pretty iron clad.

Loans (more precisely) aren't

funded from reserves

What are loans funded from?

The balance sheets of the banks that create them.

To sell you a $200,000 mortgage a new bank (with no deposits) could, as I said, create the loan out of thin air and acquire the necessary reserves after the fact via the interbank market (borrowing other banks excess reserves).

These excess reserves that your bank borrows.......why does the other bank have them?
Where did the other bank get them from?

The Fed is the lender of last resort and it sets reserves requirements. If there were no reserves the Fed could supply them.

Of course, we both know the economy didn't start out as fiat so there was already money in circulation in the banks when the fiat standard began.

So why would banks have money? Because people have the desire to save.

So my bank now has a $200k liability and a $200k asset plus interest. That night it goes on the interbank market and borrows the necessary reserves, in this case, $2000.

Why do you have a $200k liability? Remember, you have no deposits.

Deposits aren't the only form of liability. The bank created $200k from nothing and recorded that liability on its books. Bank regs require that money be repaid, thus it is a liability that the bank is ultimately responsible for. The bank uses the borrower's payment to repay its obligation, however, if the borrower fails to meet their obligation, the money would come from the repossession of collateral or the bank's profits.

No, I explained that the money a bank creates isn't from reserves,

Reserves leave a bank when they make a loan or return a deposit. Correct?
Simple question.

The Fed pays interest on all reserves.

You are correct

Thank you.

What I said is that banks don't fund loans from reserves (deposits). You disagree.

I'm waiting for you to give me my $200,000 mortgage, with no deposits.

A paper Written by the Cheif economist at Standard and Poors


Here is the link between reserves and bank lending. Reserves go down when banknotes increase. Banknotes increase when borrowers take the money they borrowed out of the bank and part or all of the money remains in cash, rather than being re-deposited in the banking system. For an individual bank, the link between reserves and loans is an indirect and largely uncontrollable one. Individual banks can try to "get rid of" their excess reserves by making new loans, and, to the extent that the deposits so created leave their bank and, importantly, do not return as new deposits (the bigger the bank the less likely this condition is to hold), this will work for them.

As I said, "Your links were fine. They just don't mean what you think they mean"

You linked to an article that supports the Austrian point-of-view.

Just to answer the question, "how do you think large pools of savings helps the economy"?

Now I admit, the Forbes article was written by an academic (so it has a bit more of a slant), but I like that one because he lays it out, in a graph, using double entry accounting. It's pretty iron clad.

Pretty sure there were a few errors in his spreadsheets.

The Fed is the lender of last resort and it sets reserves requirements. If there were no reserves the Fed could supply them.

That doesn't answer my questions.

These excess reserves that your bank borrows.......why does the other bank have them?
Where did the other bank get them from?

Deposits aren't the only form of liability. The bank created $200k from nothing and recorded that liability on its books.

There is no liability without a creditor.
Thin air isn't a creditor.

Bank regs require that money be repaid, thus it is a liability that the bank is ultimately responsible for.

To what entity is the bank paying back this $200,000 thin air liability?

 

[Toddsterpatriot]

The bank has to repay the loan that the customer is repaying?
Or is the bank repaying a loan to thin air?
This attempt of yours is really confusing.

Let me ask you if you believe that the bank loans customer deposits to other customers if the borrower defaults, what happens then?

The bank reports a loss. If the loss is large enough, they can't give their depositors their money back.
The bank fails. The FDIC seizes it. Pays off the depositors with FDIC funds.

 

[Econ4Every1]

Let's try this visually....

Todd tell me where you disagree...

Here we have Joe and a bank.

Joe Borrows $100. According to you the bank's reserves should decline by $100?

Here's how I see it;

 

[Toddsterpatriot]

Let's try this visually....

Todd tell me where you disagree...

Here we have Joe and a bank.

Joe Borrows $100. According to you the bank's reserves should decline by $100?

Here's how I see it;

Well, Joe could take his loan as cash....the bank sees reserves drop by $100.

Well, Joe could take his loan as a check, deposits it at B of A....the bank sees reserves drop by $100.

Tell me where you disagree.

 

[ImJustABill]

Well, Joe could take his loan as cash....the bank sees reserves drop by $100.

Well, Joe could take his loan as a check, deposits it at B of A....the bank sees reserves drop by $100.

Tell me where you disagree.

These are both true at the micro level. Reserves at individual banks do flow in and out, but reserves in the aggregate do not change in this transaction.

Cash is somewhat of a special case as most individual do not have reserve accts but can hold cash. Every coin and note can by considered a reserve acct on its own or in aggregate.

 

[Toddsterpatriot]

Well, Joe could take his loan as cash....the bank sees reserves drop by $100.

Well, Joe could take his loan as a check, deposits it at B of A....the bank sees reserves drop by $100.

Tell me where you disagree.

These are both true at the micro level. Reserves at individual banks do flow in and out, but reserves in the aggregate do not change in this transaction.

Cash is somewhat of a special case as most individual do not have reserve accts but can hold cash. Every coin and note can by considered a reserve acct on its own or in aggregate.

Reserves at individual banks do flow in and out, but reserves in the aggregate do not change in this transaction.

Yes. We're not talking about the aggregate.

 

[Econ4Every1]

Yes. We're not talking about the aggregate.

That's exactly what I was talking about. Reserves don't leave the banking system except as cash. I said several times that reserves are simply transferred between banks.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

 

[The Sage of Main Street]

I didn't, but tell me then, what other kinds of deposits are there

You don't know? Still in school, eh?

You cut me deep....lol

No, I just want to know what you think.
_____________________________
Sure...I never said banks didn't lend deposits.

Ummm....So, no, loans do not come from deposits.

Were you lying then, or are you lying now?

There is a distinction here, you are either missing or ignoring, and I can't figure out which.

Now go back and re-read what I wrote.

I said "Banks don't lend customer deposits to other customers"

If you don't understand the distinction, I'm not surprised you can't grasp what I'm trying to tell you.

If banks don't loan customer deposits to other customers, where do banks get the money they lend?

They create the money out of thin air. The loan is secured by the note which is deposited as an asset. The "backstop" (if you will) is the underlying asset (collateral) the borrower purchased (houses and cars as an example) that can be reclaimed and sold to cover the loan taken. If there is no collateral or it wasn't worth what it takes to repay the loan, the bank must withdraw from its capital to cover the loss. If the bank's liabilities exceed its capital, the bank is insolvent.
_______________________________
So deposits are useful, in a Pre-2008 world, bank deposits are the lowest cost reserve a bank usually had.

[Deposits are] Still are lowest cost. Still useful.

Yet we see interbank lending levels at rates we having seen since early 1980's. So they aren't as useful as they were pre-2008...Beeeeeeecasuse the excess reserve level is so high.

Wow! So wrong. Just for fun, prove it.

Yep, that was a mistake. Today we're just over 100 basis points.

Yes, I pointed out you were wrong when you said that.

Funny, because I provided several sources that say the opposite. What were your sources?

Really? Why would a Fed bank wish to borrow from another Fed bank? Spell out their logic in doing so.

Just to be clear....Fed bank=Fed member bank. The regional banks and Federal reserve are settlement banks.

Again, pre-2008 the Fed target rates through open market operations. Those operations added or removed reserves in the system overall and thereby maintained a certain liquidity level, and thereby maintained the desired level of scarcity of reserves which helped the Fed target a certain "window" for interest rates. Loans create deposits and deposits are reserves thus the reserve level would continually increase (in a growing economy) without OMO removing excess reserves in exchange for securities.

Banks lend to other banks because some banks had excess reserves and other banks had a deficit of reserves. The banks with deficits would borrow reserves (usually overnight) from those that had an excess. Since banks weren't paid interest on excess reserves, then lending them to other banks (Perhaps you've heard of interbank lending?). If there was a deficit in the system overall, bank could borrow directly from the Fed.

This is why banks desire savers. So they can meet their reserve requirements without having to borrow from other banks or the Fed. In the best case, a bank would have enough reserves to meet their requirement and enough to lend to other banks.

Banks do not lend customer deposits to other customers, only to other banks. Reserves do not circulate in the economy.
_______________________

The $1 is created out of thin air

Cool.

View attachment 142643

Did they print it?
Because I need to hit the vending machine down the hall.

This thin air you are talking about is the air the economy needs to breathe. Aco
Banks don't "print" money, they create money electronically. If a bank needs physical dollars it trades them to the Fed for reserves.

That "thin air" you preach against is the air the economy needs to breathe.

 

[Toddsterpatriot]

Yes. We're not talking about the aggregate.

That's exactly what I was talking about. Reserves don't leave the banking system except as cash. I said several times that reserves are simply transferred between banks.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

That's exactly what I was talking about.

I'm talking about a single bank.
Still working on my $200,000 mortgage with no deposits?
Because, so far, you're failing to deliver.

I said several times that reserves are simply transferred between banks.

You said banks don't make loans from deposits or reserves.
I just showed you two ways you're wrong.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

And then you ruined it when you said they had to pay it back to thin air.

 

[Toddsterpatriot]

I didn't, but tell me then, what other kinds of deposits are there

You don't know? Still in school, eh?

You cut me deep....lol

No, I just want to know what you think.
_____________________________
Sure...I never said banks didn't lend deposits.

Ummm....So, no, loans do not come from deposits.

Were you lying then, or are you lying now?

There is a distinction here, you are either missing or ignoring, and I can't figure out which.

Now go back and re-read what I wrote.

I said "Banks don't lend customer deposits to other customers"

If you don't understand the distinction, I'm not surprised you can't grasp what I'm trying to tell you.

If banks don't loan customer deposits to other customers, where do banks get the money they lend?

They create the money out of thin air. The loan is secured by the note which is deposited as an asset. The "backstop" (if you will) is the underlying asset (collateral) the borrower purchased (houses and cars as an example) that can be reclaimed and sold to cover the loan taken. If there is no collateral or it wasn't worth what it takes to repay the loan, the bank must withdraw from its capital to cover the loss. If the bank's liabilities exceed its capital, the bank is insolvent.
_______________________________
So deposits are useful, in a Pre-2008 world, bank deposits are the lowest cost reserve a bank usually had.

[Deposits are] Still are lowest cost. Still useful.

Yet we see interbank lending levels at rates we having seen since early 1980's. So they aren't as useful as they were pre-2008...Beeeeeeecasuse the excess reserve level is so high.

Wow! So wrong. Just for fun, prove it.

Yep, that was a mistake. Today we're just over 100 basis points.

Yes, I pointed out you were wrong when you said that.

Funny, because I provided several sources that say the opposite. What were your sources?

Really? Why would a Fed bank wish to borrow from another Fed bank? Spell out their logic in doing so.

Just to be clear....Fed bank=Fed member bank. The regional banks and Federal reserve are settlement banks.

Again, pre-2008 the Fed target rates through open market operations. Those operations added or removed reserves in the system overall and thereby maintained a certain liquidity level, and thereby maintained the desired level of scarcity of reserves which helped the Fed target a certain "window" for interest rates. Loans create deposits and deposits are reserves thus the reserve level would continually increase (in a growing economy) without OMO removing excess reserves in exchange for securities.

Banks lend to other banks because some banks had excess reserves and other banks had a deficit of reserves. The banks with deficits would borrow reserves (usually overnight) from those that had an excess. Since banks weren't paid interest on excess reserves, then lending them to other banks (Perhaps you've heard of interbank lending?). If there was a deficit in the system overall, bank could borrow directly from the Fed.

This is why banks desire savers. So they can meet their reserve requirements without having to borrow from other banks or the Fed. In the best case, a bank would have enough reserves to meet their requirement and enough to lend to other banks.

Banks do not lend customer deposits to other customers, only to other banks. Reserves do not circulate in the economy.
_______________________

The $1 is created out of thin air

Cool.

View attachment 142643

Did they print it?
Because I need to hit the vending machine down the hall.

This thin air you are talking about is the air the economy needs to breathe. Aco
Banks don't "print" money, they create money electronically. If a bank needs physical dollars it trades them to the Fed for reserves.

That "thin air" you preach against is the air the economy needs to breathe.

That "thin air" you preach against is the air the economy needs to breathe.

I preach against the thin air whistling between his ears.

 

[ImJustABill]

Yes. We're not talking about the aggregate.

That's exactly what I was talking about. Reserves don't leave the banking system except as cash. I said several times that reserves are simply transferred between banks.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

That's exactly what I was talking about.

I'm talking about a single bank.
Still working on my $200,000 mortgage with no deposits?
Because, so far, you're failing to deliver.

I said several times that reserves are simply transferred between banks.

You said banks don't make loans from deposits or reserves.
I just showed you two ways you're wrong.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

And then you ruined it when you said they had to pay it back to thin air.

Banks do not lend out reserves to customers. There is inter-bank lending, but that is a separate topic.
Banks do transfer reserves as customers move deposits, make payments, or withdraw cash.

For your mortgage, a $200k asset was created for the bank along with a matching $200k liability. The liability could be a check or a deposit into another customer's account. If it goes to someone without a account at the same bank, then reserves are transferred to the other bank. In either case, additional deposits funds are created from your loan.

When payments are made from an account at one bank to someone with an account at a different bank, once again reserves are transferred accordingly.

When cash is withdrawn from a bank, that is effectively the same as a transfer of reserves (usually temporary) as cash is basically a portable reserve account.

For paying back the loan:
When you transfer money from your checking account to your loan account, both balances are reduced by the same amount and that credit is extinguished.

 

[Toddsterpatriot]

Yes. We're not talking about the aggregate.

That's exactly what I was talking about. Reserves don't leave the banking system except as cash. I said several times that reserves are simply transferred between banks.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

That's exactly what I was talking about.

I'm talking about a single bank.
Still working on my $200,000 mortgage with no deposits?
Because, so far, you're failing to deliver.

I said several times that reserves are simply transferred between banks.

You said banks don't make loans from deposits or reserves.
I just showed you two ways you're wrong.

I said that banks create money Ex Nilo and account for those funds on their balance sheets.

And then you ruined it when you said they had to pay it back to thin air.

Banks do not lend out reserves to customers. There is inter-bank lending, but that is a separate topic.
Banks do transfer reserves as customers move deposits, make payments, or withdraw cash.

For your mortgage, a $200k asset was created for the bank along with a matching $200k liability. The liability could be a check or a deposit into another customer's account. If it goes to someone without a account at the same bank, then reserves are transferred to the other bank. In either case, additional deposits funds are created from your loan.

When payments are made from an account at one bank to someone with an account at a different bank, once again reserves are transferred accordingly.

When cash is withdrawn from a bank, that is effectively the same as a transfer of reserves (usually temporary) as cash is basically a portable reserve account.

For paying back the loan:
When you transfer money from your checking account to your loan account, both balances are reduced by the same amount and that credit is extinguished.

Banks do not lend out reserves to customers.

Then what good are reserves?

Banks do transfer reserves as customers move deposits, make payments, or withdraw cash.

Does my $200,000 mortgage reduce the reserves of the bank I borrowed from?
Are those reserves still available for my bank to use for their other business?

If I borrow $200,000 and ask for $20s, does my loan reduce the reserves of the bank I borrowed from?
Are those reserves still available for my bank to use for their other business?

For your mortgage, a $200k asset was created for the bank along with a matching $200k liability.

Yes.

The liability could be a check or a deposit into another customer's account

Yes.

If it goes to someone without a account at the same bank, then reserves are transferred to the other bank.

Yes.