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

220 Money, Bank Credit, and Economic CyclesAfter these operations, Bank B’s balance sheet wouldappear as follows:(37) Bank BBalance Sheetc=0.1 and k=0.2AssetsLiabilitiesCash 107,079 Demand deposits 1,070,789Loans 963,710Total Assets 1,070,789 Total Liabilities 1,070,789If we imagine that V pays his debts to U, who in turndeposits the money he receives in his bank, Bank C, then thefollowing journal entries would result:Bank C(38) Debit Credit770,969 Cash Demand deposits 770,969(made by U)846,185 Loans to R Demand deposits 846,185676,948 Demand deposits Cash 676,948The bank would make this last entry when R withdraws80 percent (k=0.2) of his loan from Bank C to pay his creditors(T, for example).Once these operations have been completed, Bank C’s balancesheet would appear as follows: