Comment: actually, you're close but not exact.

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actually, you're close but not exact.

It's not a 1k "new loan" that becomes 10k in new money. It is a 1k deposit that allows the bank to loan out 9k(if given a 10% reserve ratio and a succession of payments and deposits through various banks depositing and loaning). The reason it totals 10k though is because the bank still claims the 1k original deposit still exists, when nothing could be further from the truth.

Now, that's not to say that 1k couldn't be borrowed by Willy Nilly to buy a used car from Joe Blow.. Then Joe deposits that 1k in his bank account and THEN... The bank can loan 9k against it (again in sucessive loans and deposits not all necessarily at the same bank).

So you had it close, just reverse 1k loan for 1k deposit.

Paul