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

258 Money, Bank Credit, and Economic CyclesIf all the bank’s borrowers return their loans paying withchecks, the bank’s balance sheet will look like this:(69)Bank ABalance Sheetc=0.1, k=0 and f=0AssetsLiabilitiesCash 1,000,000 Demand deposits 1,000,000Total Assets 1,000,000 Total Liabilities 1,000,000This balance sheet clearly reflects the 9,000,000 m.u. reductionin the money supply or tightening of credit. An identicaldecline would result from the simultaneous repayment ofloans in isolated banks, as in entries (66) and (67), througha process identical to the inverse of the one shown in TableIV-2.Fifth, if the loans lose their value due to the failure of theeconomic activity for which they were employed, the correspondingbank must record this fact as a loss, as shownhere:Bank A(70) Debit CreditLosses due to 9,000,000 Loans 9,000,000defaulters(expenses)The bank’s balance sheet would then look like this: