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Napanee, Ontario | yea I think there are a lot of people that don't understand how the banks are run. It's a pretty sweet gig really.
You put up the deposit (ie the fraction, or margin requirement) and they create the money out of thin air to loan you based off that deposit. Most people you talk to think that this money (that is the mortgaged balance your bank provides) is actually taken out of bank reserves the bank already has. When you tell them it's actually created out of thin air based on the fractional lending regulations that allow them to do so - ie they put up NO CONSIDERATION - it usually gets a few people pretty upset. You're deposit becomes their deposit that allows them to create the fractional portion. Essentially, you are the only one putting anything up on the deal.
there was a landmark case in 1969, Jerome Daly v First National Bank of Montgomery, that everyone should have a good read and understanding of.
EDIT: for example - if I loan you money, its from money I already have. That's my consideration. How nice would it be if you asked me for a 100k loan and I could just go out back, run the press for 10 minutes, and come back out with a suitcase full of money? cause that's essentially what the banks do.
Edited by OldMcdonald 7/29/2014 17:13
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Bankers and cattle prices
