Comment Comment by laurus The bank doesn't usually "have the money to give" when it makes a loan.Let's say Bank A loans $1000 to a customer. It creates a $1000 bank deposit in that customer's account. On the balance sheet it looks like this:Bank A:(Asset) Loan to customer of $1000(Liability) Bank deposit in account of customer $1000Bank A created the $1000 at will out of thin air. This is how it happens most of the time. parent laurus 6 years ago
Let's say Bank A loans $1000 to a customer. It creates a $1000 bank deposit in that customer's account. On the balance sheet it looks like this:
Bank A:
(Asset) Loan to customer of $1000
(Liability) Bank deposit in account of customer $1000
Bank A created the $1000 at will out of thin air. This is how it happens most of the time.