Then there was an innovation.

We all have heard of it.

Now the natural question is, how far can this process continue?

Maybe you're sixty five years old.

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

Interest on loans is high at present.

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

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

So 10 of 110 is 11.

I'm thinking about people's jobs, about their mortgages and pensions and their college funds for their kids.

I want more time

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

The loan carries 5.5 interest.

Let's say I make out some loans for different projects.

I'll open a bank account.

I have a fairly wealthy village.

He deposited the prize money in the bank.

I just give them a checking account.

The money rests in a safe at the bank.

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.

Scarlett's deposits.

Everyone pooled in.

And we went the fractional reserve route.

And let's say you still owe pretty close to 150 thousand on the loan to the bank your loan might have even been an interest only loan but even after a year or two you're probably not going to pay down the balance of your loan too much it might be like 140 thousand, or 145 thousand

I want to deposit some money.

I trusted him with the money.

So what would be total demand liabilities?

The reserve store value is gold.

I'm going to write a check, but obviously I don't have the money in my bank account right now, otherwise I wouldn't even be going to the payday loan.

I have a lot of money in my savings account.

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.

The bank keeps money for people.

He left his safe in my care.

Deposits on long term leases.

I entrusted my money to him.

And then instead of giving them actual gold,

That's where all these people here put their money.

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

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.

So how much could I expand my balance sheet?

loans to this bank.

He has plenty of money in the bank.

I have 100 in terms of the building itself.