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
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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