How bank creates money by

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alessandraalasvillalta1 — 2024-03-25 23:24:01 UTC

I think everyone in their life once asked to themselves: how bank creates money? how are they able to give huge loans to many people and not go bankrup? do they have infinite money? how does a bank work?

In this blog i will do my best to provide information and videos to give an answer to all those questions that we once had, i will focuse mainly on how they actually create money.

How does Bank of Canada creates money

alessandraalasvillalta1 — 2024-03-25 23:25:00 UTC

This website explains mainly how the Bank of Canada creates money, letting us know that they do so by making asset purchases or making loans. it also mentions that the majority of money created in Canada is withing the private banking system every time banks extend new loans like mortgages, consumer loans and business loans.

I thought this website has value information to contribute to the topic as it focus mainly on the bank of Canada and it also explains about how Canada in general creates money, it is also a website that goes straight to the point on answering the question "how does the bank of canada creates money?"

History of how bank create money

alessandraalasvillalta1 — 2024-03-25 23:25:07 UTC

In this 1 minute video we can learn the basics of how the banking system works, it explains the history, interests and fractional reserve banking.

i Thought it was important to understand exactly how banks have money , this video has history on it and explains it really well on how it works now.

Making loans

alessandraalasvillalta1 — 2024-03-25 23:25:14 UTC

In this website we learn how loans work in banks, it explains that with the deposits they get daily they are able to make long-term loans to people and this works for them because they pay less to depositors and they receive more from the borrowers.

I added this website as it is important to understand how loans work in a bank and how it is sustainable for them, also loans and deposits make a big part on how they create their money,

Bank failure

alessandraalasvillalta1 — 2024-03-31 16:58:16 UTC

If we are talking about banks and how they work i believe knowing this is important. Banks can fail and they can go bankrupt, when that happens it may try to borrow money from other solvent banks to pay its depositors. If the failing bank cannot pay its depositors, a bank panic might ensue, causing depositors to withdraw their money from the bank (known as a bank run).

I thought this website was important to add i believe we have all asked ourselves "what happens if a bank goes bankrupt?" this answers it pretty well and in general, it doesn’t focus in any specific bank.

What is the bank of Canada?

alessandraalasvillalta1 — 2024-03-31 16:58:19 UTC

As mentioned on the video the bank of Canada its the main one of the country, it oversees public debt program, manage the country's financial system before it was the bank of montreal.

I thought this video was important to add as it explains the role of the bank of Canada and a little bit of history.

baking system: money and credit

alessandraalasvillalta1 — 2024-03-31 16:58:22 UTC

How banks create money in general

alessandraalasvillalta1 — 2024-03-31 16:58:25 UTC

Now this one its really interesting, it explains how banks work in general, from a deposit that you make they make a loan to other person with high interest , so , in other words , you deposit certain amount and they give you an interest for that money but then when they loan the same amount to someone else they receive a higher interest rate for it, and , thats how they are creating money.

How banking works

alessandraalasvillalta1 — 2024-03-31 16:58:29 UTC

banks of Canada

alessandraalasvillalta1 — 2024-03-31 16:58:33 UTC

In this image we can see the main Banks of Canada which are 5 of them , Canada Trust, Royal Bank Of Canada, Canadian Imperial Bank Of Commerce , Scotiabank and Bank of Montreal. Also you can see a graphic of the deposits made to them, unfortunately its outaded

Reflection

alessandraalasvillalta1 — 2024-03-31 16:58:36 UTC

knowing how banking works is highly important to understand how money works, with this we know that if we make a $100k deposit one day we cannot take it out the next day because that money probably isnt in the bank anymore and we will have to wait some time for the bank to give out that high amount back again, its an ongoing chain but the money we see reflected on our account its not necessarily physically there. With this investigation i was able to learn more about how banking works.

How money works

alessandraalasvillalta1 — 2024-03-31 16:58:40 UTC

Big question everyone has asked at least once in their life : how money works? in this image we have an illustration that explains it really well, its a cyrcle around the bank which has a reserve which is given as a loan which is then deposited back in the bank