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splitting the zero - asset and liability

#economics #money

  1. Robert took a loan at RBS, so he signed a contract to repay RBS £10,000, which is legally enforcible, so RBS has an asset (Robert's promise).
  2. ​Robert, having committed to pay RBS £10,000 back, wants to receive his ‘loan’. So RBS opens up [a deposit] account for him, and types in £10,000. So, now RBS has a liability now as well (on Robert's demand, the money can be withdrawn from his deposit account).
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Mark Wadsworth: Positive Money
00 over a period of five years, plus interest. This legally enforceable contract represents a future income stream for the bank, and when the bank comes to draw up its balance sheet it will be included as an additional asset worth £10,000. <span>Robert, having committed to pay the bank £10,000, wants to receive his ‘loan’. So RBS opens up [a deposit] account for him, and types in £10,000. This is recorded as a liability on RBS’s balance. Notice that no money was transferred or taken from any other account, the bank simply updated a computer database. A bank does not ‘lend money’ – to lend one must have money to lend in t

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