Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

The Credit Expansion Process 207Bank A(24) Debit Credit878,048 Demand deposits Cash 878,048(80% of 1,097,560)The bank’s balance sheet would appear as follows:If we suppose that 20 percent of the 900,000 m.u. which leave the bank’svault will again be deposited in the same bank, and that 90 percent ofthat amount will then be loaned, etc., the entries appear as follows:(27) Debit Credit180,000 Cash Demand deposits 180,000When 90 percent of this amount is loaned:Bank A(28) Debit Credit162,000 Loans Cash 162,00032,400 Cash Demand deposits 32,40029,160 Loans Cash 29,1605,832 Cash Demand deposits 5,8325,248 Loans Cash 5,248We have supposed that 20 percent of each loan granted has returnedto the bank’s vault, given that the final recipients of that proportion offunds loaned are customers of the bank.Therefore, a balance sheet drawn up according to the continental systemwould look like this: