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It is possible that a foreign branch of a US bank might make loans denominated in USD. So if you consider that bank part of a foreign country, I guess you could say that a foreign country could create USD. But those USD stay within the US banking system unless some cash ends up under a mattress somewhere.
It is possible that a foreign branch of a US bank might make loans denominated in USD. So if you consider that bank part of a foreign country, I guess you could say that a foreign country could create USD. But those USD stay within the US banking system unless some cash ends up under a mattress somewhere.
The loans on a banks books are constrained by the reserve requirements. Banks sell loans. This side steps those reserve requirements. The required reserves don't constrain the up side of monetary growth if you allow loans to be transferred off of the originating banks books. The flip side of this is that there is no requirement to loan out reserves in excess of those required to be held.
China is or was buying Mortgage Backed Securities and using that as the collateral for newly printed money. And they were using that newly printed money to expand their economy with. That is what my story shows.
You are reading articles without being able to decide for yourself if they are full of fertilizer or not. My story is just a simplification of how international money transfers work. Simplified to the point that those that know how it works will find fault as it being oversimplified to the point of not being accurate anymore. The simplifications that I've made don't affect the function of the system martially.
You are reading articles without being able to decide for yourself if they are full of fertilizer or not. My story is just a simplification of how international money transfers work. Simplified to the point that those that know how it works will find fault as it being oversimplified to the point of not being accurate anymore. The simplifications that I've made don't affect the function of the system martially.
Sorry I can't follow your story.
New USD can legally only be created by the Fed, our Gov't or from within the US banking system as loans. Now there certainly can be all kinds of shadow banking, shenanigans and such. But a foreign entity can only trade for USD, not create them.
New USD can legally only be created by the Fed, our Gov't or from within the US banking system as loans. Now there certainly can be all kinds of shadow banking, shenanigans and such. But a foreign entity can only trade for USD, not create them.
When they buy loans they are printing USD just as assuredly as if they originated the loans themselves. The reason is simple. If you are fully loaned out, that is you have loaned out 90% of the money on deposit in your bank, and then you sell a loan you aren't fully loaned out anymore. You have less loans on your books and you have more cash on hand. If you are going to be fully loaned out again, then you need to write another loan. The selling of new loans tends to lead to writing new loans. If you sell the loans to a foreign central bank then they print new money with the loan as collateral. That loan has left the US banking system. It isn't on our books any more. It is on their books. But it is still denominated in USD. It is still valued in US dollars. China's economy expands, ours contracts, our assets go up in value, and there is more USD. Some of it is in circulation here some of it is sitting on their books over there to balance the new money in circulation over there.
What we have now is the brake down of this pattern. We don't have new loans to match the sale of existing loans. We have excess reserves.
The sale of MBS to foreign central banks requires the writing of new loans to keep the ratio of deposits to reserves the same. The sale of MBS to our central bank has the same requirement. The lack of writing of new loans is why we have excess reserves.
When they buy loans they are printing USD just as assuredly as if they originated the loans themselves. The reason is simple. If you are fully loaned out, that is you have loaned out 90% of the money on deposit in your bank, and then you sell a loan you aren't fully loaned out anymore. You have less loans on your books and you have more cash on hand. If you are going to be fully loaned out again, then you need to write another loan. The selling of new loans tends to lead to writing new loans. If you sell the loans to a foreign central bank then they print new money with the loan as collateral. That loan has left the US banking system. It isn't on our books any more. It is on their books. But it is still denominated in USD. It is still valued in US dollars. China's economy expands, ours contracts, our assets go up in value, and there is more USD. Some of it is in circulation here some of it is sitting on their books over there to balance the new money in circulation over there.
What we have now is the brake down of this pattern. We don't have new loans to match the sale of existing loans. We have excess reserves.
The sale of MBS to foreign central banks requires the writing of new loans to keep the ratio of deposits to reserves the same. The sale of MBS to our central bank has the same requirement. The lack of writing of new loans is why we have excess reserves.
When a US bank loan is made, that creates the new money as a deposit. Loan - deposit = 0. The loan might be sold off to anyone anywhere, but the money creation event has already taken place.
If the loan is sold to a foreign bank they certainly can use it as collateral for anything if agreed upon by involved parties. Some banks if properly set up and approved on both sides might offer foreign currency loans. But I would imagine that anyone could make a loan in USD, just not a fully legal one or backed by the Fed/FDIC. But it would still be loan - deposit = 0.
When a US bank loan is made, that creates the new money as a deposit. Loan - deposit = 0. The loan might be sold off to anyone anywhere, but the money creation event has already taken place.
If the loan is sold to a foreign bank they certainly can use it as collateral for anything if agreed upon by involved parties. Some banks if properly set up and approved on both sides might offer foreign currency loans. But I would imagine that anyone could make a loan in USD, just not a fully legal one or backed by the Fed/FDIC. But it would still be loan - deposit = 0.
(Loan sold) = + the loan value as excess reserves.
Excess reserves can be loaned out.
So, new loan - new deposit = new 0
Or if you had $10 million on deposit, $9million in loans on those deposits, maintaining a 10% reserve, sold a $1 million loan for $1 million in deposits you would have $8 million in loans and $9 million in deposits with an excess in reserves of $1 million. Write a new loan and then you have the old balance of $9 mil in loans $10 mil in deposits.
Back in the madness of the 2000's housing bubble, banks were writing loans as fast as they could. The hang up was the time spent on the paperwork not reserve requirements. The loans were sold before they were written. (And it is my understanding that some of them defaulted before the paper work was finished.) The money to loan out came before the new loan. Or the promise of the money...
The sale of loans to foreign central banks for new money in their currency, prints money in M2 or M3 in the US, if the banking system is healthy and excess reserves are loaned out.
The upward redistribution of wealth is perhaps the biggest threat to national security. Instead of the overwhelming majority of Americans being united against the most prolific theft in world history, we're arguing with and even killing one another over manufactured, myopic conflicts.
I wouldn't mind if some of the printed money came into my mailbox now and then. It seems large banks and sons of Senators are much needier than I.
Which is why its not effectively new money. Very little of it makes it into the real economy. Its more about power transfer.
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