Money creation via fractional reserve banking - where does it show up on a bank's balance sheet?

Economics Economics Questions
1

I’m looking to show someone evidence of the money creation process of fractional reserve banking. As my undestranging goes, when a bank lends out money they can do so at a multiple of the amount of money they have on deposit. When they make a loan to loan out previously non-existant money, they’d add the value of the amount the borrower owes them under the “Assets” column, and then they’d increase something on the “Liabilities” side (I’m not sure exactly what it would be called.)

If you look at the balance sheet of a publicly held bank, what entries would show this process occurring?

2

http://www.youtube.com/watch?v=nH2-37rTA8U

3

If you read chapter 4 of Huerta de Soto’s Money, Bank Credit and Economic Cycles he goes through it in depth.

4

Deposits are the liabilities. Reserves and loans are the assets.

if i deposit $100, and the bank loans out $90, and keeps $10 in reserves, and then the person who borrowed the $90 deposits it in cash in the bank, and the bank loans out $81 and keeps $9 in reserves…then the bank has assets of $171 in loans and $19 in reserves…and liabilities of $190 in deposits.

5

Just to pick a nit: they can loan a multiple (10x) of the reserves they have on deposit at the Fed, not a multiple of the deposits they hold for their customers. They can only loan up to 90% of their customer’s deposits.

6

And for the record, reserve requirements aren’t 10%. The bank bailout bill last fall lowered it to a minimum of 0%, maximum of 3%.