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Sioux County, NWIA | Some really good reading here. A question about what happens to deposits that are created by loans. I understand that the principle of the loan is destroyed in the eyes of the lender as it is repaid. But doesn't the value of that principle remain in the economy ? For example, I borrow $100 for one year at 10% interest. At the end of the year the bank that lent it is payed back and is left with a net gain of $10, but some other financial institution somewhere has $100 more on their books. So in a way that original principle is not being destroyed? Some one explain this to me. | |
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why banks needd deposits
