And a loan to someone else that I've given is an asset.

What I could do is maybe 100 of it,

I just give them a checking account.

Checking,savings took out about 125,000 in cash.

When you put money in the bank, you deposit it.

So 10 of 110 is 11.

He deposited the prize money in the bank.

The money rests in a safe at the bank.

These are deposits that I owe to people.

Scarlett's deposits.

So what I do is, I take their 900 gold pieces, and I take it as a deposit.

This is actually the power of compounding interest.

Everything on the liabilities right now is on demand loans, which means whoever has that liability can come back and exchange it for gold at any moment in time, but the bank could've taken just a regular loan

Well, no. Because then a bank take on arbitrary amounts of risk and there are regulations, although I think a bank would do it on their own to some degree, but there're regulations called reserve requirements that tell us how much lending can a bank do relative to its actual reserves. In this case, it's reserves of gold.

And let's say that I can, in the bank,

I'll open a bank account.

I have a fairly wealthy village.

We borrowed money at high interest.

I have 300 in total demand deposits.

I want to deposit some money.

So these are kind of the important numbers in the home buying scenario.

But it's the same idea.

That's 100 , right?

That would be total bank notes in this case and bank notes are also something we'll later leave a world where every bank is issuing bank notes, but I just wanted to give you that kind of historical context, how bank notes even started off.

You know, about my money.

And I think something happened, right? He put aside a little cash for you.

It's in a safety deposit box.

I could've actually issued bank notes, same idea.

I have a lot of money in my savings account.

Now, the reality is you didn't get the cash forward, and you had to spend 200 of cash out of your pocket, so you're still, just like the cash accounting, you're still going to have negative 100 in cash.

The bank keeps money for people.

So this is the account of B. The account of Villager B.

So how much could I expand my balance sheet?

And we went the fractional reserve route.

Loan to Entrepreneur D.

I trusted him with the money.

So what would be total demand liabilities?

What if I sell a socks website, and socks have gotten even more popular.

So how can we do that?

There is a reserve requirement.

Oh, I have your winnings from last night.

I put the money in a three year time deposit at the bank.

I have 300 gold pieces of reserves

I also want 100 of that.

Americas, or your Chases of the world, then one of the