Post
Topic
Board Economics
Re: You cannot talk about Money without watching this movies first
by
Findeton
on 04/06/2011, 01:37:57 UTC
It seems to me that you are talking without even having seen the movies! Because of the fractional reserve system, as I understand, if the bank lends me 10 for my house the banking system as a whole can invent 100 or 500 or whathever amount depending the country you live in from that sole lending.

If the CENTRAL BANK lends a private bank $100 and the legally the reserve rate is at 10%=0.1, then, the maximum amount of money created will be 100/0.1=$1000. But anyway that will only happen if private banks lend each other the money infinite times before they spend it or before they lend it to a corporation/company/person. The process will actually stop rather soon.

So if banks charge 5% for a credit card debth, in reality they are making 50% or more a month.

That's not true, because the process of creating money stops/slows rather quickly. And, in the middle of a crisis, this raletization is true^100.