[–] WORF_MOTORBOATS_TROI 1 point -1 points 0 points (+0|-1) ago
This isn't creating money. The op is adding credits and debits. On a balance sheet the deposits are all on one side of the balance sheet for money owed to others, while the loans are on the other side as money owed to the bank. The 10% "fractional reserve" is the amount that they must keep on hand in order to pay out tbe money owed to others in the event that a customer comes in to collect. That's why they pay more interest for a CD or something where you agree you won't collect until a certain future date.
[–] TheSeer ago
This is correct, but the full multiplier effect is perhaps easier to understand. Once everyone has deposited their money with the bank, there will be $1000 in reserves. AND $10,000 IN LOANS. From the one $1000 initial (new) deposit.
And get this. That is at 10% reserve ratio. Most Wall St banks are actually using 3% or less. Meaning they will loan out $30 - 50 THOUSAND, for every ONE THOUSAND in new deposits.