It is not increased by the actions of banks in depositing and lending – in fact it is reduced by the amount of the solvency ratios.
I appreciate that this is not purely mainstream, but I know how these things operate in every bank I have ever worked in. You may (OTOH) argue that, in the event of a likely bank failure to deliver due to insolvency, the government is likely to step in – the (either implicit or explicit) “printing press” contingency.
Hmmmmm to me all bank deposits, if accessible electronically (subject to payment system limitations) are liquid are they not.
Let your readers be the judge – for me though basic economics does apply – and the age of electronic payment systems surely beats the neat for carrying around a slow payment and less secure method (in the form of cash). From a “bank” perspective you argue a bank account is materially different from cash.
there are more demands for withdrawals than the individual bank has access to cash to meet those demands.
Really, then, the total pool of liquidity represented by any bank is not the total amount on deposit with the bank, but the (much smaller) amount they have in ready cash or other sources of funds to meet calls for withdrawals.
The point here is that a particular bank cannot be sure where any disbursed loan funds may end up and can only count on a small proportion returning.
This means that they simply inflate their balance sheet by making loans and counting on the funds to come back as deposits.Have you ever come across electronic payment systems during your many years in these roles?The financial markets pay little credence to cash as it is “almost” impossible to settle a 0m trade in these markets with cash!The question of whether or not banks create money revolves around whether or not a bank deposit counts as “money”, properly so called.Personally, I doubt it is, as I cannot conduct payment transactions with my bank account – I need to be able to withdraw the funds first.You are right that a loan disbursement (or deposit withdrawal) from one bank will often, even usually, result in a deposit with either that bank or another – but this is generally not immediate, so the withdrawal or disbursement is separated by time from any re-deposit, nor certain.