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You are wrong. Banks don’t need deposits to create loans/money. They crate the money, out of thin air, as the conspiracy theorists like to say it, and they pay the central bank interest on it. That’s it.

Start with this paper from the BoE if you want to learn more: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...



I'm presenting an outdated and simplified version of the process, because yes, you're correct in the short term. The process happens asynchronously where the bank gets to loan out the money now and sort out the backing money later.

But it has the same _effect_: the government controls the maximum money supply and the creation of money.




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