1.   Bank deposits expand through a process of credit creation.

2.   Credit creation can take place.

3.   Then draw up the eventual balance sheet after credit creation has taken place.

4.   That this is possible is due to the process of credit creation outside the country where the currency originates.

5.   This process of credit creation by banks is discussed below.

6.   To illustrate the principle of credit creation, consider a hypothetical example of a closed economy with a single monopoly bank which observes a minimum cash ratio.

7.   Credit creation by the federal mortgage agencies has been accused of inflating a credit bubble.

8.   In addition, restrictive monetary practices in Malaysia and Thailand and curbs on credit creation in South Korea have contributed to the modest slowdown, the report said.

9.   Money creation, or credit creation, by banks, means that money supply is expanded in the banking system through deposit and lending activities.

10.   Subsequently, the interest rate level will be lowered and this facilitates credit creation.