Money creation

Perhaps many of us have heard or read time is money creation, and maybe that's a lot of us did not understand its meaning, what is the subject of money creation? How is it? What is meant by it? And how are they? And why is it? Will answer many questions in this section with the help of God. At the outset I would like to point out that the use of the term money creation here of the door to keep pace with reality because it is the term used in the literature and the ABCs of economics, but I really like to use that term and prefer to say generate money instead of money creation for many reasons, most notably that the process of creation is made from scratch This does not happen in the generation of money, then that process of creation from nothingness to God alone is the Almighty, is the creator of one of the individual is not a partner in the creation, creatures or creatures do not create from scratch.

Generally I will use the term money creation here and I have a hater, but I am compelled because it is in the economic alphabets so. What is the theme for the creation of money from this? I have a lot of non-specialists in a large mixing understand this term (money creation), they thinking version or print money or the like and this is not true at all, issuance of paper money is different from money creation as we shall see in this section. Money is intended to create a generation of million of another million in the bank to become a million has two million were before in the market, this is simply too severe, but how is it done?

To explain the process of money creation has to be a practical example of an illustrative, but by explaining the illustration should be noted here that the central bank in the state is required commercial banks to deposit statutory reserve is a percentage of what their customer deposits, if the statutory reserve, for example, 10% of customer balances , this means that the no commercial bank has a million pounds deposit 100 thousand of them as a legal reserve with the central bank, the Bank maintains commercial has 900 thousand of this deposit, must understand the previous point so that we can understand the process of money creation, which is very simple, as we will see. We come to the illustrative example and assume that the statutory reserve (the imposition of illustration only) is 50%, if the customer Q deposited in his account in Bank 1 the amount of one hundred Euros, the bank will retain 50 Euros has deposited in the Central Bank of 50 Euros as a legal reserve for the inevitable, and will come Client Y to Bank 1 and gets it to the 50 Euros in the form of lines of credit or loans, for example, and this client p went to Bank 2 and deposited by this amount, the bank 2 will retain 25 Euros and deposited in the Central Bank of the 25 euro legal reserve. The client will come and GS gets 25 Euros in loans from the bank 2 and go to put it in the bank 3, then the bank will retain 3 for $ 12.5 Euros and 12.5 filed the other with the central bank as a reserve, and so on.

Illustration of the former, we find that the amount of Euros per cent turned into a 50 +25 12.5 6.75 + ..... Etc. This means that the percent Euros that have been deposited beginning in Bank 1 have been generated, including one hundred Euros again in the form of credit facilities and loans, we got in the end the two hundred Euros, and this is what they call the creation of money, but I call it generate money as I said before, that the process of creation for anything to be out of nowhere did not have out before, but as we have seen in the example that euro cent generated fragments, have been generated about one hundred Euros is an essential first deposit, did not create from scratch.

So the process of creation here is clear and the first to say that generate money new money found in the foundation, if that customer Q did not go and deposited the sum percent Euros in bank 1 to enable the bank to generate the 50 Euros granted by the client Y, is not it? So is the process of generating and not created (Far from God), and worse, was impressed by some of this or did not like, every creature or a free man in what is believed and believe in, I personally think, and I believe in the existence of one Creator of the universe is God (SWT), and I ask God Almighty to keep So I die on this faith not change, or sedition fascinate me, and the thought of it is free is what is believed and believes (every free man in his beliefs) and calculated on the Creator.

As we have seen that the hundred-dollar deposits generate one hundred dollars of new ones, and so on, then the money generated is equal to bank deposits divided by one minus the ratio of the legal reserve, and can be represented by the following equation:

Cash =  deposits ÷ (1 - legal reserve ratio)

Applying the formula to the previous example, we find that the money that was generated as follows:

100 ÷ (1-0,5) = 200

Total amounts deposited = total loans + deposit first

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