You think it's so easy to be a bank? Try lending money some time. Its pretty risky if the borrower doesn't pay you back.
You realize, of course, that under partial reserve banking, the vast majority of the money that banks lend does not even exist until the the very act of making the loan zaps it into existence, right? How hard can it be to stay in business collecting interest on making loans of made up money?
I know how banking works. Don't try to school me about banking.
I didn't challenge your knowledge of banking.
You should learn though. [...blah blah federal reserve...]
Irrelevant to the topic at hand -- your claim was not about
the central bank, it was about _a_ bank.
Lending money is risky. If the loan defaults you are left w illiquid collateral.
Sure its risky. If lendee defaults in the first year, a bank might not break even on the 10% of the loan that was actually the bank's money. Boo fucking Hoo.
Of course, if lendee defaults later, bank is made whole on its _actual_ investment. Plus it gets to repossess what ever collateral secured the loan. May not be liquid, but the bank nets out positive. If the loan goes to term, the bank gets the 90% of the principal that was made up on the spot, plus all the interest - and all that money reflects the theft of wealth -- in the form of stolen purchasing power --- from each and every person who held dollars at the instant that 90% of the loan principal was zapped into existence.
The industry employs a funny definition of 'risk'.
Banks don't create money, Central Banks do.
Theres nothing wrong w creating money through balance sheet expansion. Its the most efficient way to inject liquidity into the economy.
That money isn't free either, it is debt. However debt is necessary for economies
Risk is simply how much money you stand to lose. In business everybody takes risk and they expect payoff in proportion to the amount of risk they take. Banks are not special in this regard. The issue is not they take risks. The issue is when risk blows up in their face they can become insolvent. Insolvency of one bank can trigger domino effect as we witnessed in 2008
Listen, you don't need to be rude. You think you know everything when clearly you don't. I suggest you read about banking and economics before trying to teach other people. Im trying to help you be more educated but believe whatever you want
Here's an article written by Steve Keen, a well respected economist. Its about myth of fractional reserve. If you want enlighten yourself then read it. Might be above your grade though. Its not easy to understand unless you've done a course in banking. Thats why I linked you that simpler and broader investopedia article.
http://www.businessspectator.com.au/article/2012/10/22/commodities/myth-money-multiplier