View Full Version : Banking, a little question

08-12-2016, 03:42 PM
US Monetary System

From wikipedia a nice, simple, straightforward explanation.

"Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+...=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+...=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity."

https://qph.ec.quoracdn.net/main-qimg-e780f6e58cd39a9b019685a1a5594d65?convert_to_webp=t rue

So the money in the system is based on deposits.
With US banks offering minimal interest, money is put into stocks bonds etc. IE deposits banks have dry up.
With reducing deposits the banks lend less.
Average credit card balance in USA is circa $15,000.00 i.e. no money in bank on deposit.
The banks appear to be lending billions on a very tiny amount of deposits.
Where is all the money for the banks to lend coming from?
Any clarification would be appreciated.

2015 American Household Credit Card Debt Study

Total owed by average U.S. household carrying this type of debt
Total debt owed by U.S. consumers

Credit cards
$712 billion

$8.37 trillion

Auto loans
$1.07 trillion

Too Little Time
08-12-2016, 07:06 PM
December 14, 2014 US banks had $15 trillion in assets. Total bank loans (the following quarter) were $8.2 trillion.

There is a lot of unused credit out there. Maybe.