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As I understand it, banks do have to balance their books: liabilities, primarily deposits, must equal assets, primarily loans--by midnight of every day. Those created deposits--issuances of credit--are short-lived, as all loans are designated by the borrowers for some immediate purpose. The loans remain on the books while/until they are repaid. It is in that way that lending is constrained by the internal circumstances of banks: they must have sufficient liabilities, primarily deposits not created by a loan, on the books--with money held by the bank in less liquid forms, such as savings accounts and CDs, also counting as assets.

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Stephen Yearwood
Stephen Yearwood

Written by Stephen Yearwood

M.A. in political economy (money/distributive justice) "Please don't confront me with my failures/ I'm aware of them" from "These Days," as sung by Gregg Allman

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