[Pops]

Sorry for the multiple posts, I should be working and creating some value, LOL

In economics, money creation is the process by which the money supply of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or "money printing" by detractors) by purchasing financial assets or lending money to financial institutions.

[/quote]
This is where all money is created.

[ralfy]

According to this source,

https://en.wikipedia.org/wiki/Money_multiplier

there are two views of the effects of fractional-reserve banking in terms of the money multiplier. Either the money is created by central banks and lent by commercial banks, or money is created by loans extended by commercial banks and then backed by central bank reserves.

A table illustrating the first view is shown in the wiki entry. Thus, a $100 created leads to a $100 sum of deposits and loans.

The second view is discussed in the article mentioned in this thread:

the-myth-of-the-money-multiplier-t67257.html

That is, credit money is created for subsequent loans and backed by additional reserves. More details are shared in the article.

[radon1]

Hyperinflation tends to occur where the government assumes the role of the money issuer and begins printing money to disburse them to "consumers", or "producers" or "electorate" or whoever, directly in essentially unlimited amounts.

Banks do not tend to produce hyperinflation irrespective of the level of the formal reserve requirements. Even if the formal reserve requirement is zero, there are always informal fractional reserves held by the banks, because they have to maintain some liquidity in order to serve the current needs of their clients (unless they indulge in outright gambling in which case they will not survive for long).

[davep]

Sorry for the multiple posts, I should be working and creating some value, LOL

In economics, money creation is the process by which the money supply of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or "money printing" by detractors) by purchasing financial assets or lending money to financial institutions.

This is where all money is created.

The vast majority of money is created through the purchase of real estate via debt. This money is created against the value of the real estate and isn't even tied into the fractional reserve limits in reality (which is why bundling mortgages into derivatives and selling them is such a bad idea). According to the Bank of England, this accounted for 97 of all UK broad money a year or so ago.

Fill your boots http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The reality of how money is created today differs from thedescription found in some economics textbooks:
• Rather than banks receiving deposits when householdssave and then lending them out, bank lending creates deposits.
• In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.

As explained in ‘Money in the modern economy: an introduction’, broad money is a measure of the total amount of money held by households and companies in the economy. Broad money is made up of bank deposits — which are essentially IOUs from commercial banks to households and companies — and currency — mostly IOUs from the central bank.
(4)(5) Of the two types of broad money, bank deposits make up the vast majority — 97% of the amount currently in circulation. (6)
And in the modern economy, those bank deposits are mostly created by commercial banks themselves.

Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.
For this reason, some economists have referred to bank deposits as ‘fountain pen money’, created at the stroke of bankers’ pens when they approve loans.(1)

The only problem is that the loan has a non-negligible interest element, so more money is required to pay back the loan, hence the requirement for growth. An economic system where money creation is tied to credit is madness.

[Simon_R]

If gold/Silver has no future as a means of exchange why is it illegal in many countries to allow the individual to advertise prices in this commodity ?

A bank does not loan depositors money, it creates a liability based on the reserve it holds and the legal requirements, small but important distinction,
ie. If someone borrows 10EUR this is not deducted from anyones bank account.

[dinopello]

The idea of how money is created can use a thought device like Gilligans Island. Everyone is stranded with very little but Mr Howell has a footlocker of money (for some unknown reason). The money only has value if everyone on the island agrees that it has value. So everyone is starving and Gilligan goes off and catches some fish. They all want the fish but have nothing to trade. Skipper says - I'll build you a hut for some fish and Gilligan wants something in writing. Mr Howell says - hey skipper, I'll loan you some of this "money" to give to Gilligan to hold as proof that you owe him a hut... and so on.

I may not have explained this right and in the end, only banksters like Pops knows how it really works

[Pops]

Thanks Dave, an interesting article, gotta wonder what BoE's motivation is for coming clean after 1,000 years?
Maybe covering it's butt in case inflation takes off with QE, LOL - ("it wasn't us!")

Hard to argue with the jolly old BoE!
Prolly won't stop me tho, LOL, but I gotta go to the bank right now, seriously.

[Pops]

The vast majority of money is created through the purchase of real estate via debt.When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.

So the bank doesn't create actual banknotes aka "money" - that should about cover it.

First lets realize that when you deposit money in a bank, you relinquish ownership to that money. it is legally the bank's money. You get an IOU in the form of the receipt. So before we go any further understand that the only "money" you have to your name right this second is the cash in your pocket and whatever you may have that someone may want to trade for at whatever price they want to give, which of course includes all the so called hard money. Everything else, checks, ATM cards, CDs, that cool app on your "phone" - those are merely promises from the bank to give you your actual money back..

So now that we are clear what "money" is ...

Banks are a facilitator between value (savings or real assets) and borrowers. They make illiquid assets liquid. They don't create value, they just make it accessible. Right? This is broader than my original position that banks loan saver's deposits but - I think - just expanding the meaning to include any hard asset, not just actual currency.

"The moment the bank credits that borrowers account money is created."

No, no money is created, just as stipulated at the begining, the banks don't normally pass out greenbacks (or whatever your national flavor) they merely jot down a couple of entries and hand you an IOU. If tomorrow everyone that got a loan asked for cash, everything would stop. Ditto if everyone decided to take a run at the bank. Back when we used to talk about prepping here I always said to keep a wad of cash because whatever you might think you have in the bank is just a promise. People recognize Benjamin, they don't have to be a numismatic or assayer to know his nominal value. They certainly would not trade anything for a bank receipt, LOL

I'm gonna do a little story like Dino did but I have already pointed and clicked too much for one day.

[ralfy]

It seems both these definitions exclude the role of the demand by customers and retail loans upon the commercial banking sector? (Nah, I'm just a paranoid economic-civilian who is not destined to understand the uber-machinations of the banking elite. )

Given that . . .
One might be slighly inclined to consider the dominant view ('money created by central banks') to be total BS. And even the acceptable alternative (--"money is created by loans extended by commercial banks and then backed by central bank reserves.". . . wiki says so) to be quite the same, the theory held by dominant institutions in the international banking cartel to screw you and me over. But of course that is just conjecture. Or serious ignorant paranoia?

Personally I believe that money is created by you and me building things, real stuff and taking out loans to do it. But hey, what do I know? I have not the faintest idea regarding power-economics.

I think the demand applies to both definitions. That is, loans are made by business and customers for goods and services. It's just that either reserves or loans are made first.

But for money supply to reach or even exceed the maximum given a reserve ratio implies that loans are made for purposes other than building things. That means financial speculation, and that very likely applies not just to a financial elite but to a growing global middle class that can earn more money through various schemes, such as investing in mutual funds, flipping houses, etc. Of course, most of the amounts used for speculation involve the rich.

[americandream]

that is our fiat-fractional reserve system money creation is dependent on bank loans ie GROWTH. You want to go back to the Gold?

But who really cares? That debate is over. Now growth is impossible, regardless of its possible necessity because . . . de-growth is here

Loans are one of the mechanisms (within the parent, reserves banking,) by which labour surplus is managed and so forth, in capitalism. Banks exist to serve capital.

[Quinny]

Banks don't really give a damn about savings, IMHO the reason the myth of banks matching savers with borrowers is perpetuated is to stop people investigating the creation of money 'the super commodity' more. If people read what the BOE says, debt and the resultant slavery become the raison d'etre. Defaulters are not as is popularly believed 'stealing' some poor old dears hard earned savings, just changing the balance sheet of the bank. The more you learn, the more Matrix like it becomes!