Un-ignored to reply to this ignorant bollocks. The money is still technically in the account, yes. Otherwise banks wouldn't be able to lend out deposits current account holders placed in them - which is one of the key functions of a bank. But it places into circulation the money that is showing in the account - it's not new money in that sense.
No, the money is not 'still technically in the account' - it is simply still in the account. It is ledger-entry money. That is the form of 97% of our money. Most of our trading is done with this money.
For example, you deposit £10 in the bank of Spiney. It's a new bank so yours is the only deposit I have - I don't have any other money. Blagsta asks me for a loan. At the point when I agree the loan 'new money' is created - but only in a in a very specific sense - and it's the use to mean something very specific and your lack of understanding of what that specific something is that's causing loons like you to say what you do. Because it exists only on a ledger - it's not real. Blagsta then withdraws the £10 I lent him. Now according to the ledger I still hold the £10 you deposited. But you try taking it out - you can't because I haven't actually got it - it only exists on the ledger. So to give it to you I have to borrow it from someone else.
You are confusing full-reserve systems with fractional. In the case you describe, it's like you are attempting, as a normal person, to indulge in fractional reserve banking, but when the run happens (I come to claim back my ten pounds) your bank fails, because the money isn't there.
THAT IS WHAT HAPPENS WHEN A FRACTIONAL RESERVE BANK HAS A RUN.
But if you weren't a new bank, and you had a lot more customers, then I COULD WITHDRAW my loan which you had 'lent out' to someone else. Because you only need to hold a fraction of reserves to cover all the people who might withdraw their money - just as people transfer money out by wire, other will transfer in by wire - and they prefer you to hold the hard cash.
That is what enables the fractional reserve bank to lend out
thirty times (not ten anymore) the money it has as 'cash reserves' (money in notes, or deposits with the Bank of England).
But as mentioned, this is also precisely why it is vulnerable to 'the run'. Because the cash isn't there.
"Because it exists only on a ledger - it's not real." As PhilDwyer has been at pains to point out, all the money is illusory in nature, however this 'not real' money constitutes 97% of the money in circulation. MOST OF OUR MONEY EXISTS AS LEDGER ENTRIES. That is what the money is. Only some 3% exists as cash.
This is why there was a financial crisis - for various reasons that I'm not going to go into because it would take too long to check the specifics, banks were unable to borrow the money to cover their liabilities.
Yes, the banks had been exposed to a run which had taken hold. No-one would lend them more money because it would just get withdrawn in the run, and they wouldn't get it back.
What you have to understand is that at any one time, with a fractional-reserve bank,
the bank's liabilities on demand deposits far exceed the cash it has to pay them with. They are always skirting this precipice.
If they'd really been 'creating money out of thin air' this wouldn't be a problem - they'd just pay you the money they 'created' and everyone would be happy.
No they wouldn't, because confidence in the bank's currency - confidence that it could be transferred out, or withdrawn as cash - had evaporated. That's why everyone goes to withdraw their money. If you and a thousand friends have £10,000 deposited in CRASHINGBANK, and there's a run, loads of people are withdrawing their cash, do you really think CRASHINGBANK might stop the run by adding £10,000 to your statements? No, you would say, I am getting what money I can out while I have the chance, and they've gone insane.
Was just a collection of books i was sticking on a USB drive for a mate and thought i'd upload rather than a planned collection. Best in there is Rubin's Essays on Marx's Theory of Value which ain't beginner stuff but needs to be read. Might be interesting compile something along the lines you suggest though. (Not tonight)
