[qnt]

Not at all.

When you get a loan, the bank creates a liability and deposit out of thin air. The deposit is a "demand deposit", which is effectively equivalent and fungible to central-bank-backed currency (hence the term "money" usually applies to both, though they are different things).

The bank needs no existing customer deposits to create a demand deposit and liability in your account.

You should run through your example again, except begin by creating a loan, rather than first beginning by a customer lending the bank a deposit.

The BoE article linked above is absolutely correct.

[baobabKoodaa]

You claim that the bank needs no existing customer deposits to create a demand deposit and liability in your account. This claim is true only in the pedantic sense: if the bank is otherwise capitalized (e.g. money from investors in the bank), then it could create loans using whatever money it has, as opposed to using money specifically from depositors. However, what you probably meant is that a bank could loan out money even if it has $0 money in the bank. This is not true at all. A bank can not loan out money if it has no money. It has no printing presses that print physical banknotes, and other banks would refuse electronic transfers from a bank which is known to have $0 money.

Furthermore, it's not clear to me how you believe that the BoE article contradicts what I'm saying. I'm under the impression that you (along with most other people) are simply misunderstanding what you are reading here.

[dools]

Can you describe how a bank uses money that it has to originate loans?

EDIT: note that this paragraph (and the one preceding it) directly contradicts what you are saying:

This description of money creation contrasts with the notion that banks can only lend out pre-existing money, outlined in the previous section. Bank deposits are simply a record of how much the bank itself owes its customers. So they are a liability of the bank, not an asset that could be lent out. A related misconception is that banks can lend out their reserves. Reserves can only be lent between banks, since consumers do not have access to reserves accounts at the Bank of England.

[colinmhayes]

You are wrong. Without existing deposits the bank has no money to loan out. They can write numbers on screens, but eventually the money they loaned out will be transferred and the bank that it was transferred to will ask for settlement.

[qnt]

That's exactly the point - money is just numbers on screens. there is no money to loan out. the act of lending creates the money.

- Bank starts with $0 capitalisation or deposits - Customer goes to bank and asks for $1 loan - Bank believes customer is creditworthy and says yep - Bank creates two accounts for customer, loan account and deposit account. Loan account is -$1 and deposit account is $1 - customer transfers $1 from their deposit account to someone else's account at a different bank in exchange for goods/services - customer account at the bank is now loan account -$1 and deposit account $0 - Customer eventually needs a way to get $1 back from somewhere else to pay the loan back, else face bankruptcy proceedings etc etc

Commercial banks all agree with each other that they accept each other's demand deposit accounts as a form of money.

[dools]

Always good to find another MMTer out in the wild ;)

[unmole]

This has absolutely nothing to do with MMT.