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

So this is my equity.

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

And I don't hand that person gold.

So how much could I expand my balance sheet?

So once again, I say, well, these are demand deposits, which means that these farmers could demand them at any time.

I'm done.

But I have other expenses.

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

The kid kept all of his money in a piggy bank.

And then instead of giving them actual gold,

And we went the fractional reserve route.

I have a fairly wealthy village.

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

So they need some place safe to put it.

We deposit money in a bank.

And then of course I have that 250,000.

I'll open a bank account.

Let me put the Laplace transform of and I'm also going to the sides.

And then I have 200 gold pieces that I just put into my building just to start it off.

You know, about my money.

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

He deposited the prize money in the bank.

They can write checks, or if these were bank notes, they could exchange those bank notes.

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

And like all of the other examples,

So he doesn't quite have 100,000.

I want to deposit some money.

So what would be total demand liabilities?

Instead of having your money insecure in your backyard or your bed, why don't you put your savings in this building and if you ever need it, you can come and get it?

Now, the first entrepreneur, he's very conservative and he's been saving all his whole life to do this.

I trusted him with the money.

So 10 of 110 is 11.

Let's say I take a 100 gold piece deposit, and of course I have an offsetting checking account that those people can at any point use either to write checks or at some point they can come back and demand their money back.

So at any given day, not everyone hopefully not everyone's going to pull their money out or put their money in.

2,000 plus 900 plus 100.

The bank keeps money for people.

He left his safe in my care.

I entrusted my money to him.

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

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.

So let's just compare Choice 1 and Choice 2 again.

I just give them a checking account.

What I could do is maybe 100 of it,

I'd like to open a savings account.