Money Creation and Banking in Modern Economies
M
O
N
E
Y
C
R
E
A
T
I
O
N
A
N
D
B
A
N
K
I
N
G
I
N
M
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D
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R
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C
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B
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D
E
Q
U
I
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Y
L
i
a
b
i
l
i
t
i
e
s
Loan:
100,000,000
C
u
r
r
e
n
t
a
s
s
e
t
s
N
o
n
-
c
u
r
r
e
n
t
a
s
s
e
t
s
Plant:
63,000,000
Equipment:
37,000,000
Bank account:
10,000,000
E
q
u
i
t
y
Paid-in capital:
10,000,000
Retained earnings:
150,000,000
160,000,000
60,000,000
0
50,000,000
Goods:
10,000,000
Accounts receivable:
10,000,000
C
E
N
T
R
A
L
B
A
N
K
R
E
S
E
R
V
E
S
Reserves
Equity
C
O
M
M
E
R
C
I
A
L
B
A
N
K
A
Assets
Liabilities
and equity
Reserves
Equity
C
O
M
M
E
R
C
I
A
L
B
A
N
K
B
Assets
Liabilities
and equity
Reserves
Equity
C
O
M
M
E
R
C
I
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L
B
A
N
K
A
Assets
Liabilities
and equity
Reserves
Equity
C
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C
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B
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Assets
Liabilities
and equity
Reserves
Equity
C
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D
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M
O
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C
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A
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Reserves
Equity
C
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Assets
Liabilities
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F
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Assets
Liabilities
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Deposit
Loan
Deposit
New loan
C
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M
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D
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Reserves
Equity
C
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Assets
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Assets
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Deposit
Loan
Deposit
New loan
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Reserves
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Assets
Liabilities
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F
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Assets
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Deposit
Loan
Deposit
New loan
I
V
A
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I
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Assets
Liabilities
and equity
Equity
Cash
Deposit
Cash
Deposit
Cash
D
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P
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Deposit
Reserves
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Deposit
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R
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Deposit
P
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Assets
Liabilities
and equity
Loan
Deposit
Deposit
Loan
Deposit
Deposit
New loan
Loan
Deposit
Deposit
New loan
Cash
R
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Liabilities
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P
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P
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Assets
Liabilities
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Bank
reserves
Equity
C
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K
Assets
Liabilities
and equity
C
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Assets
Liabilities
and equity
Bank
reserves
Assets
G
O
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R
N
M
E
N
T
Assets
Liabilities
and equity
Gov.
reserves
Equity
Gov.
reserves
Assets
Bank
reserves
Bank
reserves
Deposit
Gov.
reserves
Gov.
reserves
Equity
P
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R
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O
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X
Assets
Liabilities
and equity
Deposit
Equity
H
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Bank
reserves
Equity
C
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Assets
Liabilities
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C
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Liabilities
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Bank
reserves
Assets
G
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Assets
Liabilities
and equity
Gov.
reserves
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Gov.
reserves
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Deposit
Bank
reserves
Bank
reserves
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H
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Assets
Liabilities
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C
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Bank
reserves
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reserves
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This content delves into the concepts of money creation, banking, balance sheets, assets, liabilities, equity, central bank reserves, credit money creation, credit money destruction, cash, different types of money, as well as risks for banks. It covers various aspects of modern banking systems and their operations, providing insights into how money is created, circulated, and managed within the economy.
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Presentation Transcript
ASSETS LIABILITIES AND EQUITY Current assets Liabilities 10,000,000 160,000,000 60,000,000 50,000,000 100,000,000 0 Bank account: Loan: 10,000,000 Accounts receivable: Non-current assets Equity Plant: 63,000,000 37,000,000 Paid-in capital: Retained earnings: 10,000,000 150,000,000 Equipment: Goods: 10,000,000
COMMERCIAL BANK A COMMERCIAL BANK B Liabilities and equity Liabilities and equity Assets Assets Reserves Equity Reserves Equity COMMERCIAL BANK A COMMERCIAL BANK B Liabilities and equity Liabilities and equity Assets Assets Reserves Equity Reserves Equity Reserves Equity
COMMERCIAL BANK FIRM Liabilities and equity Liabilities and equity Assets Assets Deposit Loan Reserves Equity New loan Deposit
COMMERCIAL BANK FIRM Liabilities and equity Liabilities and equity Assets Assets Deposit Loan Reserves Equity New loan Deposit
COMMERCIAL BANK FIRM Liabilities and equity Liabilities and equity Assets Assets Deposit Cash Loan Reserves Equity New loan Deposit Cash Deposit IVAN RAJIC Liabilities and equity Assets Cash Deposit Equity
DIFFERENT TYPES OF MONEY (totals for the entire banking sector in the uK, in bn of )
RISKS FOR BANKS - RUNNING OUT OF RESERVES (ILLIQUIDITY) -
COMMERCIAL BANK A COMMERCIAL BANK B Liabilities and equity Liabilities and equity Assets Assets Reserves Reserves Equity Reserves Equity Reserves Deposit New loan Deposit Deposit New loan Deposit
RISKS FOR BANKS - RUNNING OUT OF CASH (ILLIQUIDITY) -
COMMERCIAL BANK IVAN RAJIC Liabilities and equity Liabilities and equity Assets Assets Cash Deposit Cash Equity Reserves Equity PERSON X Deposit Cash Liabilities and equity Deposit New loan Assets New loan Deposit Deposit Loan New loan Deposit Deposit Loan Deposit Loan
RISKS FOR BANKS - NON-PERFORMING LOANS (INSOLVENCY) -
COMMERCIAL BANK PERSON A Liabilities and equity Liabilities and equity Assets Assets Deposit Loan Reserves Equity New loan Deposit PERSON B New loan Deposit Liabilities and equity Assets Deposit Loan
COMMERCIAL BANK CENTRAL BANK Liabilities and equity Liabilities and equity Assets Assets Bank reserves Bank reserves Equity Assets Gov. reserves reserves reserves Bank reserves Bank Gov. Deposit Assets GOVERNMENT PERSON X Liabilities and equity Liabilities and equity Assets Assets Gov. Gov. reserves reserves Equity Equity Equity Deposit
HOW ARE BANKS BAILED OUT? - WITH GOVERNMENT MONEY -
COMMERCIAL BANK CENTRAL BANK Liabilities and equity Liabilities and equity Assets Assets Bank reserves Bank reserves Equity Equity/debt Assets Bank Bank Gov. reserves reserves Deposit New loan reserves GOVERNMENT Liabilities and equity Assets Gov. reserves Equity
HOW ARE BANKS BAILED OUT? - BY THE CENTRAL BANK -
COMMERCIAL BANK CENTRAL BANK Liabilities and equity Liabilities and equity Assets Assets Bank reserves Bank reserves Equity Equity/debt Assets Bank Bank reserves Deposit New loan reserves Assets
