Re: Credit doesn't exist?!?


"DarkProtoman" <Protoman2050@xxxxxxxxx> wrote in message
news:1151103258.877641.307090@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


So, if I lend out $2500, I've created $5000?

Not unless you're a bank.
When a bank makes a loan of $2500, they credit someone's account with $2500.
A bank balance isn't actually 'money' in the sense of being legal
tender.It's really just a promise by the bank to pay some money.But since
you can go out and spend it as if it was money, economists count bank credit
as part of the 'money supply'.



And also, If the money in
my bank acct. is lent out, how am I supposed to withdraw ANY amount w/o
causing a loan to be called in, or someother problem?

Banks keep a fraction of their deposits as cash reserves.Since it's highly
unlikely that everyone will withdraw all their money at the same time, the
bank can be 99% certain of having enough reserves to cover any withdrawals.
If a bank needs more reserves they can get them by borrowing from other
banks, selling some of their assets, or borrowing from the Fed.


.

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