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MONEY CREATION AND BANKING IN MODERN ECONOMIES MONEY CREATION AND BANKING IN MODERN ECONOMIES

MONEY CREATION AND BANKING IN MODERN ECONOMIES - PowerPoint Presentation

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Uploaded On 2018-01-19

MONEY CREATION AND BANKING IN MODERN ECONOMIES - PPT Presentation

BALANCE SHEETS ASSETS LIABILITIES AND EQUITY Liabilities Loan 100000000 Current assets Noncurrent assets Plant 63000000 Equipment 37000000 Bank account 10000000 Equity Paidin capital ID: 624967

assets equity deposit liabilities equity assets liabilities deposit reserves bank loan 000 commercial cash bankreserves gov central banks money

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Slide1

MONEY CREATION AND BANKING IN MODERN ECONOMIESSlide2

BALANCE SHEETSSlide3

ASSETS

LIABILITIES AND EQUITY

Liabilities

Loan:

100,000,000

Current assets

Non-current assets

Plant:

63,000,000

Equipment:

37,000,000

Bank account:

10,000,000

Equity

Paid-in capital:

10,000,000

Retained earnings:

150,000,000

160,000,000

60,000,000

0

50,000,000

Goods:

10,000,000

Accounts receivable:

10,000,000Slide4

CENTRAL BANK RESERVESSlide5

Reserves

Equity

COMMERCIAL BANK A

Assets

Liabilities

and equity

Reserves

Equity

COMMERCIAL BANK B

Assets

Liabilities

and equity

Reserves

Equity

COMMERCIAL BANK A

Assets

Liabilities

and equity

Reserves

Equity

COMMERCIAL BANK B

Assets

Liabilities

and equity

Reserves

EquitySlide6

CREDIT MONEY CREATIONSlide7

Reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

FIRM

Assets

Liabilities

and equity

Deposit

Loan

Deposit

New loanSlide8

CREDIT MONEY DESTRUCTIONSlide9

Reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

FIRM

Assets

Liabilities

and equity

Deposit

Loan

Deposit

New loanSlide10

CASHSlide11

Reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

FIRM

Assets

Liabilities

and equity

Deposit

Loan

Deposit

New loan

IVAN RAJIC

Assets

Liabilities

and equity

Equity

Cash

Deposit

Cash

Deposit

CashSlide12

DIFFERENT TYPES OF MONEY

(totals for the entire banking sector in the uK, in bn of

£)Slide13

RISKS FOR BANKS

- RUNNING OUT OF RESERVES (ILLIQUIDITY) -Slide14

Reserves

Equity

COMMERCIAL BANK A

Assets

Liabilities

and equity

Reserves

Equity

COMMERCIAL BANK B

Assets

Liabilities

and equity

Deposit

Deposit

Reserves

New loan

Reserves

New loan

Deposit

DepositSlide15

RISKS FOR BANKS

- RUNNING OUT OF CASH (ILLIQUIDITY) -Slide16

Reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

Deposit

IVAN RAJIC

Assets

Liabilities

and equity

Equity

Cash

New loan

Cash

Deposit

PERSON X

Assets

Liabilities

and equity

Loan

Deposit

Deposit

Loan

Deposit

Deposit

New loan

Loan

Deposit

Deposit

New loan

CashSlide17

RISKS FOR BANKS

- NON-PERFORMING LOANS (INSOLVENCY) -Slide18

Reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

PERSON A

Assets

Liabilities

and equity

Deposit

Loan

Deposit

New loan

Loan

Deposit

Deposit

New loan

Loan

PERSON B

Assets

Liabilities

and equitySlide19

HOW DOES THE GOVERNMENT PAY US AND HOW DO WE PAY IT?Slide20

Bank

reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

CENTRAL BANK

Assets

Liabilities

and equity

Bank

reserves

Assets

GOVERNMENT

Assets

Liabilities and equity

Gov.reservesEquity

Gov.reserves

Assets

Bankreserves

Bank

reserves

Deposit

Gov.

reserves

Gov.

reserves

Equity

PERSON X

Assets

Liabilities

and equity

Deposit

EquitySlide21

HOW ARE BANKS BAILED OUT?

- WITH GOVERNMENT MONEY -Slide22

Bank

reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

CENTRAL BANK

Assets

Liabilities

and equity

Bank

reserves

Assets

GOVERNMENT

Assets

Liabilities and equity

Gov.reservesEquity

Gov.reserves

New loan

Deposit

Bank

reserves

Bank

reserves

Equity/debtSlide23

HOW ARE BANKS BAILED OUT?

- BY THE CENTRAL BANK -Slide24

Bank

reserves

Equity

COMMERCIAL BANK

Assets

Liabilities

and equity

CENTRAL BANK

Assets

Liabilities

and equity

Bank

reserves

Assets

New loan

Deposit

Bank

reserves

Equity/debt

Bankreserves

Assets