This article has always bugged me because I get hung up here:
> 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.
That's certainly not how it worked for me in the US. My bank account went down dramatically in the process of buying a house because I had to wire the down payment to an escrow company, and the bank gave either the escrow company or seller the rest of the funds (I assume, I had no visibility into the process. But at no point did me-as-borrower get an increase in my deposits!
Is that super meaningful? I wouldn't think so, except for that if the seller wants cash, or wants to deposit that money in a different bank (or puts it into the stock market, or whatever) then it requires my lending bank to have something other than just numbers in their own internal database - they have to convince that other institution that they're good for the money they just lent out. And that's the part where I'd assume consumer deposits would come back into play - unless the banks have another source of currency on hand.
> 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.
That's certainly not how it worked for me in the US. My bank account went down dramatically in the process of buying a house because I had to wire the down payment to an escrow company, and the bank gave either the escrow company or seller the rest of the funds (I assume, I had no visibility into the process. But at no point did me-as-borrower get an increase in my deposits!
Is that super meaningful? I wouldn't think so, except for that if the seller wants cash, or wants to deposit that money in a different bank (or puts it into the stock market, or whatever) then it requires my lending bank to have something other than just numbers in their own internal database - they have to convince that other institution that they're good for the money they just lent out. And that's the part where I'd assume consumer deposits would come back into play - unless the banks have another source of currency on hand.