Original sentence: According to this critique, this is the primary cause of credit cycles or business cycles, because money supply creation is not under any single entity's control and is decentralized among many banks that are trying to maximize profits individually.If a bank has a reserve requirement of 10% and they have 10 million dollars in bank deposits, they can create 100 million dollars to loan out to borrowers, or make other investments if it is an investment bank.It is essentially going on margin 10:1 without having to pay interest on the margin, because it is in effect money that they created themselves
Edited sentence: If a bank has a reserve requirement of 10% and they have 10 million dollars in bank deposits, they can create 100 million dollars to loan out to borrowers or make other investments if it is an investment bank.It is essentially going on margin 10:1 without having to pay interest on the margin because it is money that they created themselves.This is the reason there are credit cycles or business cycles, because money supply creation is not under any single entity's control and is decentralized among many banks that are trying to do the best they can