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
Illya Gerasymchuk
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. bankβs balance sheet:
β Assets: +$1000 (the T-bill)
β Liabilities: +$1000 (the deposit/payment to you)
the key here is that you are a NON-bank