Money creation through credit creation

Money creation through credit creation is the additional creation of deposit money by credit institutions.
Experience has shown that customers of the credit institutions only have some of their deposits in cash, so that a large part of the cash on hand remains unused. This excess liquidity can be lent to other customers without the individual banks experiencing liquidity problems. Most of these loans are granted as book loans, which the borrower can dispose of without cash. At the credit institutions of the payee, the transfer leads to new deposits, which can lead to renewed loan issuance and thus to renewed creation of bank money, taking into account a certain liquidity reserve.

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