I have been reading about this topic recently and still don't really understand how 'new money' is being created. In a loan, the bank creates an IOU that didn't exist before and doesn't point to a stack of $$ on the shelf. But it does point to the bank, and the bank itself has tons of customer deposits. And if I take that IOU and give it to a car dealership who puts it in their bank, for the transfer my bank will take actual money from the general pool of customer deposits. AND I have to pay back the loan which goes into the general pool. So while specific money isn't earmarked, the IOU represents money that the bank has right?
I guess a way to ask the question would be: if i were to liquidate all assets of a bank and call in every loan, would that be >= all customer deposits?
I guess a way to ask the question would be: if i were to liquidate all assets of a bank and call in every loan, would that be >= all customer deposits?