Money is Made by Lending, not Saving
We now know that all bank-made money is created by lending. As a result, we know that no bank lends savers’ funds. They are not the intermediaries that they were once supposed to be. The reality is that cash savings in banks are macro-economically inconsequential because they almost never create new employment or jobs in the way they are saved at present
Except the banks must balance their books at 4.30 pm every day.
What Capt Smash is doing is moving from the very particular to the general and missing the intermediate step which disproves.
It’s entirely true that a bank doesn’t wait for someone to deposit and then decide who to lend it to. They do indeed lend first. But that’s a very specific thing. At the end of the day – the banking day, that 16.30 hours – the bank must have balanced books. It must be true that capital plus deposits equals loans.
Look at how Total Assets equals Total Liabilities plus Total Equity.
Loans equals deposits plus capital. Or, as we might say – ahaha – balance sheets balance. As an accountant would expect.
The way banking works is that this is true every day at that witching hour. Not just at the quarterly results date.
So, when a bank lends money it then looks around for who to borrow it from before 16.30 that day. That’s what the Treasury Department of a bank does. It funds the lending.
So, whatever the issue at the moment of lending at the end of the day – ahaha – banks do in fact lend out depositors’ money. It’s just they find the depositors after the lend.
At which point any grander theory built on the idea that banks don’t lend out deposits is the purest bullshit.
And the correct question to ask when someone asserts such a theory is – why do bank balance sheets always balance then?