Re:$700bn Bailout is shot down by House of Rep Vote (205-228...
by jodrellblank on Monday September 29, 2008 @08:21PM
(#319083)
If there's only one bank in the world, how can it have less in its vault than the sum of the depositor's accounts, if it isn't lending the difference out of nothing? Have people been depositing forged cheques?
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Re:$700bn Bailout is shot down by House of Rep Vote (205-228...
by gills on Monday September 29, 2008 @09:04PM
(#319133)
Because currency is only a quanta for trade and it's physical manifestation doesn't need to exist in equal amount to all assets and obligations.
As for fractional reserve banking (the regulated version, anyway...), the bank needs only to hold enough capital to write down expected losses on loans. Much of this mess has been caused by the banks voluntarily levering out of this safety margin.