Christ you are a muppet - you're constantly contradicting your previous statements. Of course you can lend out money that you actually have! This is the same as funding a loan prior to its actual extension, i.e. you can lend out money that you have already secured. That in itself is of course a banality though. Your claim was that if a bank got a deposit of £100 they could lend out this thirty times without having to get the money from anywhere - yet when asked how they do that, you simply state they have got the money to lend it out! So what you've done above is confirm that what you said was possible earlier is not actually possible. I ask again though, that money that they 'actually have' where does that come from? what is the accounting entry and flows that arise when that money comes into them? we know one side of it which is a debit entry representing the money they have as an asset - but what is the other side of that? anything you say here will obviously be a credit entry (in the eyes of the bank) and in turn that has to represent a liability with an external party (customer, interbank lender or central bank). That in turn shows that a bank has to be able to fund any loans it makes. It can't just magic the money up out of anywhere, it relies on whoever the external party is that that credit/liability entry represents a liability to
You miss the point which is that the bank can lend up to thirty times the amount of cash it has. IT DOESN'T ACTUALLY LEND OUT THE CASH WHEN IT MAKES A LOAN. Although I said "it can lend out a £1000 cash deposit thirty times" the loans are simply ledger entries. The cash doesn't go anywhere. Not until someone withdraws it, but the whole point is that at any one time, only a fraction of depositors will withdraw.
You're showing how little grasp you have on this here - the loan from the point of view of the bank is an asset, not a liability you muppet. In the bank's books the loan is something due back to them, so it's a debit entry in their ledger which represents an asset. Now i'm asking you again, what is the other side of that entry - what is the credit entry? (which form the point of view of the bank is a liability). As i said above, anything you say here will be a credit entry (in the eyes of the bank) and that has to represent a liability with an external party (customer, interbank lender or central bank). That in turn shows that a bank has to be able to fund any loans it makes. Which in turn makes a mockery of your claim that the bank can just magic the money into existence.
Again you miss the point which is that "the loan" - the thing which gives the recipient purchasing power - is the liability expressed by the bank. That is the money! It is an accounting entry. Of course on the other side, the loan is recorded as an asset. That is not the thing that circulates: that entry stays where it is. The bank liability to the customer -
that is the thing that circulates, and we regard as money.
It seems that you still do not regard the accounting entry as the money.
I gave a pretty detailed breakdown of the accounting entries when a loan takes place, so I don't understand why you are still asking me for them. I have not got any similar from you regarding your comments "fund the loan position" where you don't give the accounting entries.
Even your previous example (which was correct by the way) of what happens when someone pays money from their account to another account, shows that the bank is not the independent, money creating, entity in all this. In that its the party which wishes to pay money from their account to someone else that instigates the flows & accounting entries that the bank then makes. This is what I meant earlier when I said the accounting entries are a reflection of something happening, they are the effect not the cause. But you are either unable or unwilling to aknowledge this (even though your examples actually prove it) because it pulls the rug away from your nonsense that commercial banks just create money out of nothing. When in fact they can only play a part in credit creation if all the other dependecies and requirements are in place - which makes them the dependent, not independent actor[/quote]
"Credit creation" = money creation. So you agree they create money. What on earth are you thinking they create it from? Potatoes? I have no idea as to the rest of the logic of this paragraph. "The accounting entries are a reflection of something happening" - they ARE the thing that happens. You can say the process instigated in someone's mind - this is just silly.
wrong - what you describe above is the internal accounting entry, at the point of doing this, the bank has to be in a position to fund the withdrawl of that money from the loan account. which can only be done by ensuring they already have existing money in their own liquid accounts or ensuring they can fund the soon to be drawn loan by funding it though customer deposits, interbank lending, etc.. all of which, from the eyes of the bank would entail an entry which would be DR Bank Cr Liability (with the liability being the bank's liability to whoever they funded the position from)
No, you continually misunderstand this, it's not about cash being earmarked to cover the loan, it's about money being earmarked to cover the loan. If they don't do that, the loan doesn't get made. I can't put it any simpler than that. You've even proved this above in two of your examples without even realising i (i.e. to move money from one person's account to another requires the agreement and involvement of the person with the money in their account in the first place, and to loan out £100 thirty times requires, in your own words, 'cash that they actually have' (although I wouldn't refer to that as cash but money, but i know what you meant)
So you accept that "money" may be different to cash (including reserves). So, where does that money come from? The commercial banks create it.
You have a point that banks have to anticipate what will happen to their cash reserves if they make new loans. If the loans are going to be taken out of the bank, then that does effect their bank of england reserves so in theory the multiple expansion process is safer, with the new money being created incrementally as deposits flow between banks with each new loan. However the thing I wish to stress is that deposit expansion process somehow looks just like the same 'money' moving around - like something you or I could do - when the credit creation on that scale is absolutely NOT something you or I could do. We cannot lend out the same tenner thirty times, with thirty people able to demand the one tenner at any time. We get caught out. However, on a smaller scale, we can do the poker example I described earlier, which is exactly the same as fractional reserve lending but on a much smaller level.
your continually mixing this up - this is not a discussion about the form of money - the fact that only 3% of money circulates in the form of cash is completely irrelevant to the discussion we're having. All the time i've been talking about money, not cash, and in fact the only person who has mentioned cash, when they should have said money, was you - just above.
So the 97% of money which is not cash (or BofE reserves) is created by commercial banks. It is money. It is created from nothing. It exists as accounting entries.
