RodISHI
Platinum Member
- Nov 29, 2008
- 25,786
- 11,297
- 940
Yet the actual cash money did not really vanish did it?This depends on each bank, it s called the money multiplier: The percentage of money that can be loaned.
A bank can say that it will loan 30% of its money on the bank to other individuals, corporations, ...
Normally laws of the government say that each bank has to have a certain amount of money available (not loaned out). But each times when the economy booms, certain members of the government want to lower that bar (more money loaned out). And that is when it becomes dangerous, the more money you loan out the more risk you take (because more money can "vanish" if all goes horribly wrong).
No, it is like I said in the example of the first banker. 2 people own the same amount of cash. Imagine that the one who loaned the money uses it to buy a house that he will pay back to the bank, the money from the 2 people is used on the house and if the bank goes bankrupt then 1 guy owns a house (hasn't pay of the loan because the bank doesn't exist anymore) and the other guy is broke because the bank gave his money to the guy that bought the house.
The house is still there so the asset still exist that the money got loaned on. Your saying the bank is now out of the picture. One guy lost his cash (because the bank loaned it out) and the guy who got the loan gets the house because the bank is no more?
So the guy who bought the house got a free house basically. I have not seen it work exactly like that yet. I have heard a few stories that a few judges have not allowed the banks to foreclose on due to certain banks fraudulent practices.
Non existent/bankrupt banks are a mess to contend with. Combine that with the last ten years of running loose and unimpeded it is worse than even just a bankrupt bank. I believe that is one of the reasons the feds have not closed them down yet.
Last edited: