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Fractional Reserve Banking Debate – Question

Summary:
I've been in debate with an ex CEO of a bank. He says banks lend out deposits and called me a conspiracy theorist.Anyway, two interesting articles Banks do not create money out of thin air, by Pontus Rendahl, Lukas B. Freund In recent years, some have claimed that banks create money ‘ex nihilo’. This column explains that banks do not create money out of thin air. From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise. In addition to bank solvency representing a constraint on private money creation, banks require access to liquid reserves in order to be able to engage in money creation. Banks do not create money out of thin

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I've been in debate with an ex CEO of a bank. He says banks lend out deposits and called me a conspiracy theorist.

Anyway, two interesting articles

Banks do not create money out of thin air, by Pontus Rendahl, Lukas B. Freund


In recent years, some have claimed that banks create money ‘ex nihilo’. This column explains that banks do not create money out of thin air. From an economic viewpoint, commercial banks create private money by transforming an illiquid asset (the borrower’s future ability to repay) into a liquid one (bank deposits); they would quickly be insolvent otherwise. In addition to bank solvency representing a constraint on private money creation, banks require access to liquid reserves in order to be able to engage in money creation.

Banks do not create money out of thin air

Pontus Rendhl and Lucas B. Friund debunked.

What answer can I give to this tweet below? Does anyone have a good article I can read on it.

Its a daft idea that banks lend out of reserves, because reserves are what retail banks lend to the central bank.
Banks lend out of deposits. If you don't agree then explain why deferred spending in the form of deposits is always slightly greater than loans granted.

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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