Re:U.S. Treasury Data Lab
by DSMan195276 on Tuesday September 14, 2021 @10:09PM
(#28534383)
Only as a proportion of the total amount of money deposited in the bank. That 7x means that if $100 is deposited, the bank can loan out up to $87.5 and would have to keep $12.5, which equates to loaning out x7 the amount kept as reserve. In that scenario there still was only ever $100 dollars, but depending upon how you count the money supply the bank has now 'created' an extra $87.5 and the total supply is $187.5.
In practice it's a lot fuzzier than that, but the above is the basic concept people are usually talking about. The 7x doesn't mean the government or someone else is handing them extra dollar bills, it's just the ratio of what has to be kept in reserves vs. can be loaned out, and the amount that is loaned out effectively gets counted twice in terms of the money supply (and many more times over, since that money will get deposited into a bank and loaned out again at that 7x ratio).
Re:U.S. Treasury Data Lab
by BobbyJo on Sunday September 26, 2021 @08:17AM
(#28660289)
If that 87.50 is deposited at the bank, then they can now loan out against that as well, no? Then, on a 100$ initial deposit, they have lended out over 100$.
In practice it's a lot fuzzier than that, but the above is the basic concept people are usually talking about. The 7x doesn't mean the government or someone else is handing them extra dollar bills, it's just the ratio of what has to be kept in reserves vs. can be loaned out, and the amount that is loaned out effectively gets counted twice in terms of the money supply (and many more times over, since that money will get deposited into a bank and loaned out again at that 7x ratio).