Posts Tagged ‘Bank Deposits’
What Will Change the Total Amount of Bank Deposits Held by the (Non-Bank) Private Sector?
In: Flash Cards
By: Andrea Terzi
The total amount of bank deposits has nothing to do with the saving attitude, or with the spending decisions, of bank accounts’ holders. A new bank deposit can only be created through two main channels. In one, deposits are born twins with bank loans to the non-bank private sector (households or firms). In the other, deposits are born twins with bank reserves as a result of payments made by the public sector (Treasury or Central bank) to the non-bank private sector. A third process, yet smaller in importance, is when the banking sector makes net payments to the non-bank private sector.
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- Tags: Bank, Bank Deposits, Banking, Central, Central Bank, Private Sector
By: Andrea Terzi
No, it never does. The total amount of deposits in the banking system cannot change as a result of spending decisions by households or firms (technically, the “non-bank private sector”). Spending decisions can only move deposits from one account to another, and cannot cause a change in overall deposits.
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- Tags: Bank Deposits, Banking, Spending
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