Table A1. Credit creation process #...

Table A1.

Credit creation process

# Transactions	Deposit	Reserve	Loan	Interest paid	Interest earned
1	1,000,000.00	150,000.00	850,000.00	30,000.00	51,000.00
2	850,000.00	127,500.00	722,500.00	25,500.00	43,350.00
3	722,500.00	108,375.00	614,125.00	21,675.00	36,847.50
4	614,125.00	92,118.75	522,006.25	18,423.75	31,320.38
5	522,006.25	78,300.94	443,705.31	15,660.19	26,622.32
6	443,705.31	66,555.80	377,149.52	13,311.16	22,628.97
7	377,149.52	56,572.43	320,577.09	11,314.49	19,234.63
8	320,577.09	48,086.56	272,490.53	9,617.31	16,349.43
9	272,490.53	40,873.58	231,616.95	8,174.72	13,897.02
10	231,616.95	34,742.54	196,874.40	6,948.51	11,812.46
11	196,874.40	29,531.16	167,343.24	5,906.23	10,040.59
12	167,343.24	25,101.49	142,241.76	5,020.30	8,534.51
13	142,241.76	21,336.26	120,905.49	4,267.25	7,254.33
14	120,905.49	18,135.82	102,769.67	3,627.16	6,166.18
15	102,769.67	15,415.45	87,354.22	3,083.09	5,241.25
16	87,354.22	13,103.13	74,251.09	2,620.63	4,455.07
17	74,251.09	11,137.66	63,113.42	2,227.53	3,786.81
18	63,113.42	9,467.01	53,646.41	1,893.40	3,218.78
19	53,646.41	8,046.96	45,599.45	1,609.39	2,735.97
20	45,599.45	6,839.92	38,759.53	1,367.98	2,325.57
21	38,759.53	5,813.93	32,945.60	1,162.79	1,976.74
22	32,945.60	4,941.84	28,003.76	988.37	1,680.23
23	28,003.76	4,200.56	23,803.20	840.11	1,428.19
24	23,803.20	3,570.48	20,232.72	714.10	1,213.96
25	20,232.72	3,034.91	17,197.81	606.98	1,031.87
26	17,197.81	2,579.67	14,618.14	515.93	877.09
27	14,618.14	2,192.72	12,425.42	438.54	745.53
28	12,425.42	1,863.81	10,561.60	372.76	633.70
29	10,561.60	1,584.24	8,977.36	316.85	538.64
30	8,977.36	1,346.60	7,630.76	269.32	457.85
31	7,630.76	1,144.61	6,486.15	228.92	389.17
32	6,486.15	972.92	5,513.22	194.58	330.79
33	5,513.22	826.98	4,686.24	165.40	281.17
34	4,686.24	702.94	3,983.30	140.59	239.00
35	3,983.30	597.50	3,385.81	119.50	203.15
36	3,385.81	507.87	2,877.94	101.57	172.68
37	2,877.94	431.69	2,446.25	86.34	146.77
38	2,446.25	366.94	2,079.31	73.39	124.76
39	2,079.31	311.90	1,767.41	62.38	106.04
40	1,767.41	265.11	1,502.30	53.02	90.14
41	1,502.30	225.35	1,276.96	45.07	76.62
42	1,276.96	191.54	1,085.41	38.31	65.12
43	1,085.41	162.81	922.60	32.56	55.36
44	922.60	138.39	784.21	27.68	47.05
45	784.21	117.63	666.58	23.53	39.99
46	666.58	99.99	566.59	20.00	34.00
47	566.59	84.99	481.60	17.00	28.90
48	481.60	72.24	409.36	14.45	24.56
49	409.36	61.40	347.96	12.28	20.88
50	347.96	52.19	295.76	10.44	17.75
Sum	6,664,695	999,704	5,664,991	199,941	339,899
Capital			566,499	0	33,990
Net interest income					173,949
Return on equity					0.31

# Transactions	Deposit	Reserve	Loan	Interest paid	Interest earned
1	1,000,000.00	150,000.00	850,000.00	30,000.00	51,000.00
2	850,000.00	127,500.00	722,500.00	25,500.00	43,350.00
3	722,500.00	108,375.00	614,125.00	21,675.00	36,847.50
4	614,125.00	92,118.75	522,006.25	18,423.75	31,320.38
5	522,006.25	78,300.94	443,705.31	15,660.19	26,622.32
6	443,705.31	66,555.80	377,149.52	13,311.16	22,628.97
7	377,149.52	56,572.43	320,577.09	11,314.49	19,234.63
8	320,577.09	48,086.56	272,490.53	9,617.31	16,349.43
9	272,490.53	40,873.58	231,616.95	8,174.72	13,897.02
10	231,616.95	34,742.54	196,874.40	6,948.51	11,812.46
11	196,874.40	29,531.16	167,343.24	5,906.23	10,040.59
12	167,343.24	25,101.49	142,241.76	5,020.30	8,534.51
13	142,241.76	21,336.26	120,905.49	4,267.25	7,254.33
14	120,905.49	18,135.82	102,769.67	3,627.16	6,166.18
15	102,769.67	15,415.45	87,354.22	3,083.09	5,241.25
16	87,354.22	13,103.13	74,251.09	2,620.63	4,455.07
17	74,251.09	11,137.66	63,113.42	2,227.53	3,786.81
18	63,113.42	9,467.01	53,646.41	1,893.40	3,218.78
19	53,646.41	8,046.96	45,599.45	1,609.39	2,735.97
20	45,599.45	6,839.92	38,759.53	1,367.98	2,325.57
21	38,759.53	5,813.93	32,945.60	1,162.79	1,976.74
22	32,945.60	4,941.84	28,003.76	988.37	1,680.23
23	28,003.76	4,200.56	23,803.20	840.11	1,428.19
24	23,803.20	3,570.48	20,232.72	714.10	1,213.96
25	20,232.72	3,034.91	17,197.81	606.98	1,031.87
26	17,197.81	2,579.67	14,618.14	515.93	877.09
27	14,618.14	2,192.72	12,425.42	438.54	745.53
28	12,425.42	1,863.81	10,561.60	372.76	633.70
29	10,561.60	1,584.24	8,977.36	316.85	538.64
30	8,977.36	1,346.60	7,630.76	269.32	457.85
31	7,630.76	1,144.61	6,486.15	228.92	389.17
32	6,486.15	972.92	5,513.22	194.58	330.79
33	5,513.22	826.98	4,686.24	165.40	281.17
34	4,686.24	702.94	3,983.30	140.59	239.00
35	3,983.30	597.50	3,385.81	119.50	203.15
36	3,385.81	507.87	2,877.94	101.57	172.68
37	2,877.94	431.69	2,446.25	86.34	146.77
38	2,446.25	366.94	2,079.31	73.39	124.76
39	2,079.31	311.90	1,767.41	62.38	106.04
40	1,767.41	265.11	1,502.30	53.02	90.14
41	1,502.30	225.35	1,276.96	45.07	76.62
42	1,276.96	191.54	1,085.41	38.31	65.12
43	1,085.41	162.81	922.60	32.56	55.36
44	922.60	138.39	784.21	27.68	47.05
45	784.21	117.63	666.58	23.53	39.99
46	666.58	99.99	566.59	20.00	34.00
47	566.59	84.99	481.60	17.00	28.90
48	481.60	72.24	409.36	14.45	24.56
49	409.36	61.40	347.96	12.28	20.88
50	347.96	52.19	295.76	10.44	17.75
Sum	6,664,695	999,704	5,664,991	199,941	339,899
Capital			566,499	0	33,990
Net interest income					173,949
Return on equity					0.31

Notes:

This table presents the credit creation process of the modern fractional reserve banking system. A deposit of 1 million is converted into a loan of above 5 million, assuming a 15% cash reserve ratio and a 10% capital adequacy ratio. Finally, the bank earns a 31% return on equity, which is 6% otherwise (lending interest rate). However, this can happen to this degree only if none withdraws cash

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