How banks can give out loans but ever giving out gold.
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Banking, banks, economics, Finance, gold, loans20 Responses to 'Banking 7: Giving out loans without giving out gold'
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sorry,
what happens to the cash when it is used to pay back loans?? does the bank keep that cash for itself??
watch the first video..
Your example leaves implicit the introduction of gold necessary to base the two loans. Makes it seem like the gold magically appears, when it really doesn’t.
Difference between checking and saving accounts is usually determined by the institution but generally a checking account (or current account in the UK) is intended for frequent transactions (getting your salary in, drawing some cash out, or paying for Modern Warfare II at the store with a debit card).
Savings accounts are intended for – well – savings! They usually have restrictions over how much you can draw per month and offer a higher interest rate for your money.
An asset simply is any economic resource you own.
Capital or Equity are the same thing, they are the economic resources you actually own if you pay all your dues (liabilities).
Capital (Equity) = Assets – Liabilities
[what you actually own] = [what you own] – [what you owe]
whats an asset?
whats the difference between capital and equity?
whats the difference between saving account and checking account?
So you would rather go to a mine and work hard and dangerous hours to create money, when you could just sit at a computer and do the same thing but much easier?
No no, banks are charging interest because of the risk, and as manager.
If you fail to repay the loan, the bank will be in trouble.
All I’m saying it that it’s utter nonsense to allow private banks in such a monetary system. They bring nothing to the table and collect all the interests. Even worse, they imply ownership of 96% of the money supply (debt presumably owed to them). Credit should be public and debt-free.
the bank is acting as a conduit here. As every loan has a depositor and creditor, the “work” the bank does is to manage the risk and pay the depositor.
But taking a loan is just giving a promisory note (with our signature) in exchange of promisory notes from the bank, aka bank notes. The bank doesn’t have to work to gain those notes. Why should you have to work to repay them? You’re just buying back your promise to pay (the asset security) with other promises to pay (new bank notes) so the bank can discharge the liability on its book. Wether you repay or discharge the liability the bank contracted for your signature, it’s the same.
wow u guys r just nerds that read from the book and never studied in real life
Yes, but his solution that we should literally be using physical gold is simply impractical. People would barter with everything if that was the case. It’s the same thing as saying there should be no such thing as currency because to do otherwise is immoral.
In fairness to nemnaisa; his got a point and he is trying to critique the bad side of the system. Remember a system is only effective if the rest of its parts are working properly.
You obviously have no idea what you are talking about and probably never went to college. Or if you did, you did not pay attention.
I understand what Sal is trying to do: to justify the current fractional reserve banking system. The point why gold should be money is that it takes effort and human energy to extract gold from the ground hence it is precious and cannot be manipulated. While digital dollar can be manufactured by the bank anytime. The point is that banks are enjoying the spread by essentially doing nothing in the money creation process. Now, they try to keep all the profit while socializing the lost.
Thanks to the FAILOUT, they are not required to have anything in reserve
Whats the maximum the bank can loan out in this vid, assuming money is not redeposited and there is no sort of multipier? cheers
Lol, I can see that this is going to get juicier and juicier and how the banks basically neglected their requirements of keeping enough assets to cover the loans that were outstanding. I often wonder what the bank examiners were doing? Visions of “It’s a Wonderful Life” keep popping in my brain, and the massive run on the bank. Y’know I think Hollywood should make a movie about this. It’s a Wonderful Life 2008.
your voice sounds cool