Do you get the impression he thinks that a banker making a loan goes into the vault and grabs a bag of cash and gives it to the borrower?
Do you get the impression he thinks that a banker making a loan goes into the vault and grabs a bag of cash and gives it to the borrower?
Actually, although the vault consists of computer bits, that is exactly what happens. The bank has a certain amount of actual money on hand, and when it writes a check to the car dealer and it clears,the federal reserve clearing house debits the bank's "vault" and credits the car dealer's bank's vault. Real "money" changes hands. As we all just discussed, through fractional reserve banking the total amount of such transaction does multiply the money in the banking system in the sense that the total amount of cash your bank has to have on hand and the amount it has to have on deposit with FED or member bank is established by rules everyone can go look up. Your bank, however, did not just create all by its lonesome some of its own money, for which act it would go to jail either for conterfeiting or for fraud.
But since you worked for a primary dealer, you already knew that when the paper you trade clears, one account is debited and another is credited and none of you got to print your own money.