Joseph Laliberté — A microeconomic perspective on the “loans create deposits” meme

A private bank’s “cash and cash equivalent” position as shown on its balance sheet typically includes its deposits with other banks, excess reserves at the central bank and vault cash.  In financial accounting, the cash flow statement illustrates the main elements impacting the cash and cash equivalent position of a business between the beginning and the end of a given period.

Perhaps one of the most fascinating aspect concerning the obsession of mainstream macro economists with banks’ cash and cash equivalent position (excess reserves, in particular) is the near irrelevant status this component has in banking and financial circles.

Read it at Fictional Reserve Banking
A microeconomic perspective on the “loans create deposits” meme
by Joseph Laliberté
(h/t Clonal Antibody)