Ok, since you rightly are asking for more details, I will try to explain my position. First, the disclaimer, I'm not an economics major, but I have read enough to understand things like the Bretton Woods system, the transition to the petrodollar, the transition period to the Federal Reserve, IMF and World Bank. So I'm just a layman with a particular interest in the higher-level view of how banking, in particular, central banking on a national and international scale, operates. I'm always open to learning more or being corrected, because it's a huge very insular group that's hard to get good info from on certain things (see: Libor scandal).
So, your original response is to someone who said their understanding was "that reserve banks create money out of thin air", so that is the foundation of our discussion at the moment. Your response on the surface feels like a refutation of that assertion, largely resting not on content necessarily but on the weight of authority that is the BoE. Essentially, what I was trying to say is that I don't think it refutes the person you were responding to, mostly because it is some very carefully crafted wording the obscures instead of reveals the truth of the matter.
A quick dissection would go as follows: while technically correct about loans showing up as deposits in accounts and thereby creating money, it ignores the basis for those loans, which is the fractional reserve system itself. It is FRB [1] that was what spawned the system of creating those deposits based on mathematical rules such as the fractional reserve rate [3] (which many people tend to think of as being 10%, though it is often not true these days). A very crude summary of that system is this; if all deposits (created money, as according to the BoE document) are 100% of a banks money, they are only required to actually have in reserve 10% of that. Therefore, the person you are responding to is essentially right. Banks create money out of thin air by entering it on systems, even when they don't actually "have" that money to lend. The reserve rate was thought of as a minimal protection required in order to assist in preventing runs on the bank if too many depositors requested their money at the same time (because, as per the reserve system, the bank doesnt actually have all that money at any one given time). So in America for example, this is the foundation of the Federal Reserve system, wherein member banks (not all banks are) then have promises of assistance from the regional reserve bank (of which there are 12, with NY Fed being the titular head of the system), so that if your local bank gets close to a "bank run" level, that regional reserve bank will inject funds to them temporarily in order to create stability, which was part of the original mandate of the Federal Reserve.
In the response you quote, the wording might lend one to understand otherwise, and that the fractional reserve system no longer works that way, especially with the patronizing ending sentence of the first paragraph about how "some economics textbooks" differ from how money is created today. I can practically hear some posh accent with an upturned nose dripping that sentence out with disdain. Silly plebs, trying to understand banking. The part about "distraction" is that it seems the bankers don't actually want people to understand how banking really works on the underside, as it is actually in their interest to obfuscate it for various reasons.
Given what I've said so far, I'm therefore not sure how the statement: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.", nor the ending of the following sentence, "or is central bank money ‘multiplied up’ into more loans and deposits" can be actually accurate. I assume there is some word trickery I am failing to understand, (see: NSA on what "collection" means) because otherwise it seems flat out wrong. I am better versed though in the American system, so perhaps there is some nuance of the English system I am unaware of. (but it is worth remembering that the American system was founded upon the British/European system, when post 1907 Knickerbocker crash congress sent a delegation to hobnob with the central bankers of Europe to learn how they did things, which was largely the basis for the Aldrich and later Federal Reserve bills)
> The fractional reserve theory where the money supply is limited by the money multiplier has come under increased criticism since the financial crisis of 2007–2008. It has been observed that the bank reserves are not a limiting factor because the central banks supply more reserves than necessary[19] and because banks have been able to build up additional reserves when they were needed.[20] Many economists and bankers now realize that the amount of money in circulation is limited only by the demand for loans, not by reserve requirements.
> ...
> Banks first lend and then cover their reserve ratios: The decision whether or not to lend is generally independent of their reserves with the central bank or their deposits from customers; banks are not lending out deposits or reserves, anyway. Banks lend on the basis of lending criteria, such as the status of the customer's business, the loan's prospects, and/or the overall economic situation.
So, your original response is to someone who said their understanding was "that reserve banks create money out of thin air", so that is the foundation of our discussion at the moment. Your response on the surface feels like a refutation of that assertion, largely resting not on content necessarily but on the weight of authority that is the BoE. Essentially, what I was trying to say is that I don't think it refutes the person you were responding to, mostly because it is some very carefully crafted wording the obscures instead of reveals the truth of the matter.
A quick dissection would go as follows: while technically correct about loans showing up as deposits in accounts and thereby creating money, it ignores the basis for those loans, which is the fractional reserve system itself. It is FRB [1] that was what spawned the system of creating those deposits based on mathematical rules such as the fractional reserve rate [3] (which many people tend to think of as being 10%, though it is often not true these days). A very crude summary of that system is this; if all deposits (created money, as according to the BoE document) are 100% of a banks money, they are only required to actually have in reserve 10% of that. Therefore, the person you are responding to is essentially right. Banks create money out of thin air by entering it on systems, even when they don't actually "have" that money to lend. The reserve rate was thought of as a minimal protection required in order to assist in preventing runs on the bank if too many depositors requested their money at the same time (because, as per the reserve system, the bank doesnt actually have all that money at any one given time). So in America for example, this is the foundation of the Federal Reserve system, wherein member banks (not all banks are) then have promises of assistance from the regional reserve bank (of which there are 12, with NY Fed being the titular head of the system), so that if your local bank gets close to a "bank run" level, that regional reserve bank will inject funds to them temporarily in order to create stability, which was part of the original mandate of the Federal Reserve.
In the response you quote, the wording might lend one to understand otherwise, and that the fractional reserve system no longer works that way, especially with the patronizing ending sentence of the first paragraph about how "some economics textbooks" differ from how money is created today. I can practically hear some posh accent with an upturned nose dripping that sentence out with disdain. Silly plebs, trying to understand banking. The part about "distraction" is that it seems the bankers don't actually want people to understand how banking really works on the underside, as it is actually in their interest to obfuscate it for various reasons.
Given what I've said so far, I'm therefore not sure how the statement: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.", nor the ending of the following sentence, "or is central bank money ‘multiplied up’ into more loans and deposits" can be actually accurate. I assume there is some word trickery I am failing to understand, (see: NSA on what "collection" means) because otherwise it seems flat out wrong. I am better versed though in the American system, so perhaps there is some nuance of the English system I am unaware of. (but it is worth remembering that the American system was founded upon the British/European system, when post 1907 Knickerbocker crash congress sent a delegation to hobnob with the central bankers of Europe to learn how they did things, which was largely the basis for the Aldrich and later Federal Reserve bills)
[1] https://seekingalpha.com/instablog/25783813-peter-palms/4549...
[2] https://en.wikipedia.org/wiki/Fractional-reserve_banking
[3] https://en.wikipedia.org/wiki/Reserve_requirement
[Bonus] https://www.youtube.com/watch?v=5IJeemTQ7Vk