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Napanee, Ontario | Its not a theory... its a fact... that's how they do business.
they way they go broke is loaning too much out against the same deposit. The initial deposit, as was historically regulated in the first publication of Modern Money Mechanics, prescribed a fractional reserve requirement of 10%... ie, a bank can loan out about 9x the amount of money it has on deposit.
you might recall zero down loans, and you might recall what happened in the few years thereafter. That was due to banks expanding their loan base without any corresponding increase in their deposits. Leverage - it's a dangerous thing. Some banks had a deposit base less than 3% of their loan portfolio. Which means if the default rate surpassed 3%, well that's all she wrote.
And it did for many, and hence the bailouts.
As for the banks printing money... they have a charter, which allows to them to borrow it from the FED at the overnight right, which is presently zero percent, as you may or may not know. And guess how the FED comes up with it??
You can probably figure out that answer. | |
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Bankers and cattle prices
