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The Big Mo Corner: How Banks Create Money, And Why That Matters

The Big Mo Corner by Mohit Satyanand.

Every time a bank extends a loan, it creates money. This is the magic of modern banking, based on fractional reserves. The process bears repetition:

Bank A has deposits of Rs. 1 lakh, and is approached by an entrepreneur for a loan of Rs. 90,000. Since the bank deems a 10% reserve adequate, it makes the loan. The entrepreneur deposits the . . .

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