If you're looking for advice about how to make a profit or a capital gain, then my apologies for the clickbait: this post is about how money itself is created.
>a financial operation that creates money must occur on both the Assets and the Liabilities-Equity side of the banking sector's ledger. Conversely, any operation which occurs only on the Assets side of the banking sector's ledger, or on the Liabilities-Equity side, does not create money.
Steve, pretty certain this is mistaken, as it does not consider expenses. Here's a counterexample. Say we provide some entertainment at a bank's holiday party, and the bank has compensated us via a bank check. There's no balance sheet *asset* to show for this, no matter how much the partiers enjoyed the show! Rather, there's a new liability to us -- on something like the "Bank Checks Outstanding" line -- and diminished shareholder equity, also on the right side of the balance sheet.
We're free to deposit our check anywhere, but as we have an account with that same bank, we present that check for deposit. The bank gains no asset in the process; it is obliged to redeem its own IOU. The bank will debit "Bank Checks Outstanding" and credit "Customer Deposits" by the same amount. It has reapportioned its liabilities at our instruction. The bank's debt to us is now liquid, mobile, redeemable in the form and place of our choosing. Money has been created in the process, hasn't it?
Good Day Steve, I am enjoying the eye opening content and am playing with models, how would I account for proceeds form imports and exports into the system.
>a financial operation that creates money must occur on both the Assets and the Liabilities-Equity side of the banking sector's ledger. Conversely, any operation which occurs only on the Assets side of the banking sector's ledger, or on the Liabilities-Equity side, does not create money.
Steve, pretty certain this is mistaken, as it does not consider expenses. Here's a counterexample. Say we provide some entertainment at a bank's holiday party, and the bank has compensated us via a bank check. There's no balance sheet *asset* to show for this, no matter how much the partiers enjoyed the show! Rather, there's a new liability to us -- on something like the "Bank Checks Outstanding" line -- and diminished shareholder equity, also on the right side of the balance sheet.
We're free to deposit our check anywhere, but as we have an account with that same bank, we present that check for deposit. The bank gains no asset in the process; it is obliged to redeem its own IOU. The bank will debit "Bank Checks Outstanding" and credit "Customer Deposits" by the same amount. It has reapportioned its liabilities at our instruction. The bank's debt to us is now liquid, mobile, redeemable in the form and place of our choosing. Money has been created in the process, hasn't it?
Cheers -- EconCCX
Good Day Steve, I am enjoying the eye opening content and am playing with models, how would I account for proceeds form imports and exports into the system.