".......Although commercial banks create new money (deposits) when they lend, they had to make sure that their liabilities (+ equity capital) were adequate to cover their total asset base to avoid being insolvent and being forced into bankruptcy........"
It must be corrected as
"......Although commercial banks create new money (deposits) when they lend, they had to make sure that their ASSET BASE (+ equity capital) were adequate to cover their total LIABILITIES to avoid being insolvent and being forced into bankruptcy........"
... but "Lending in Lockstep" is used by Bank of England and others to agitate against money creation by banks (on the way to CBDCs) - see here further and concrete critics (within description of pics): https://commons.wikimedia.org/wiki/File:Commercial_Banks_Balance_Sheets_(stylized)_-_Pic-Fusion_comparing_Aggregated_View_to_Single_View_(Pic_Source_Bank_of_England_2014).PNG
Hi,
2018/21 Frank Decker and Charles E. Goodhart described some elements of "credit mechanics" by a group of german economics, especially by Wilhelm Lautenbach. Maybe that could be useful. One of them, Hans Gestrich shows in form of stylized (commercial) bank balance sheets (1936) so called "Lending in Lockstep" (by commercial banks) - see for example: https://upload.wikimedia.org/wikipedia/commons/e/ed/Kreditgewaehrung_im_Gleichschritt_%28Giralgeldsch%C3%B6pfung%29_Gestrich_1936.png
Thank you, best regards
C.G.BRANDSTETTER
I think this sentence is wrong:
".......Although commercial banks create new money (deposits) when they lend, they had to make sure that their liabilities (+ equity capital) were adequate to cover their total asset base to avoid being insolvent and being forced into bankruptcy........"
It must be corrected as
"......Although commercial banks create new money (deposits) when they lend, they had to make sure that their ASSET BASE (+ equity capital) were adequate to cover their total LIABILITIES to avoid being insolvent and being forced into bankruptcy........"