|
SELECTED PRESS RELEASE:
|
|
posted on:
5/21/2012 9:30:31 PM EST
|
How Can Banks Lend All That Money Without Risk
banking, interest, loans
 VISIT WEBSITE (learn more)
|
Banks create money out of thin air.
Bankers know the art of lending money for a tidy profit and sharing some of this gain with the depositor as “interest.” In doing this, however, bankers are cleverly creating money.
For the sake of argument, imagine yourself depositing $100,000 in a bank. Next is a customer who borrows $10,000 to start a new business. You may figure that your deposit, minus this loan, increases the bank’s assets by only $90,000. But that is not how a banker reasons. Rather than giving the borrower $10,000 in hard cash, the money is usually credited to his bank account for him to draw upon gradually. So instead of the bank’s assets decreasing, the bank’s ledgers show a total of $110,000—$10,000 created out of thin air!
This figure juggling may give you a headache, but it brings a smile to the banker. In this way banks are able to lend more money than they really have. ‘But isn’t that dangerous?’ you ask. It can be. Especially if a bank lends money irresponsibly. Nevertheless, it is rare that all the depositors and borrowers come at the same time demanding their money. So banks keep enough hard cash on hand to handle their day-to-day business.
Now that should cause you to brim with confidence the next time you stroll into your bank. YIKES!
|
|
BUSINESS OWNER COMMENTS:
|
leave comment
|
|
** You need to be a member of IBOtoolbox to comment. Click Here to create free account.
|
 | | There is always a risk. The current state of foreclosures nationwide is a testimony of that |
| | |  | | one of my favourite subjects! I try not to help them get richer lol. |
| | |  | | | |
|