⬇️ My Thoughts ⬇️
also note that it's not just commercial banks that have accounts at the central bank. it varies by jurisdiction, but other entities also have accounts at the central bank for example, in the US the Treasury has an account at the Fed - the Treasury General Account (TGA)
if it's the central bank buying assets from other banks, such as in QE - then the central bank also creates the deposit "out of thin air", thus effectively paying for the assets to the commercial bank with a newly created deposit into their reserve account. base money increases
if it's the central bank buying assets from other banks, such as in QE - then the central bank also creates the deposit "out of thin air", thus effectively paying for the assets to the commercial bank with a newly created deposit into their reserve account. base money increases
when banks buy assets from other banks - new deposits do not get created, as the payment happens by moving funds between the commercial bank's reserve accounts at the central bank thus, it's base money movements/reallocation, not creation
when banks buy assets from other banks - new deposits do not get created, as the payment happens by moving funds between the commercial bank's reserve accounts at the central bank thus, it's base money movements/reallocation, not creation
let's say the bank bought a T-bill from you for $1000. for this, they "created $1000" and deposited them into your account. bank’s balance sheet: ➖ Assets: +$1000 (the T-bill) ➖ Liabilities: +$1000 (the deposit/payment to you) the key here is that you are a NON-bank
let's say the bank bought a T-bill from you for $1000. for this, they "created $1000" and deposited them into your account. bank’s balance sheet: ➖ Assets: +$1000 (the T-bill) ➖ Liabilities: +$1000 (the deposit/payment to you) the key here is that you are a NON-bank
here, the bank's assets increase by the value of the T-bill and liabilities increase by the amount that they paid you for it. in the balance sheet the T-bill will have the same value as what the bank paid you/deposited into your account