Bank Credit

  

Bank credit can be viewed from both a macro and micro level. On the macro level, bank credit is the total borrowing capacity a bank can provide to borrowers. On the micro level, bank credit is the agreement between the bank and its individual borrowers under which they borrow and repay funds plus interest for loans, credit cards or lines of credit.

The sum of the micro level activities approximates the macro level version of bank credit (how much the bank could lend at a maximum). However, the whole is greater than the sum of its parts. In other words, the impact of the individual loans is greater than the whole loan pool. Multiplier effect, among many other liquidity-driving things at work.

And yes, banks beats the old days when everything was cash and carry.

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