Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Ilaine who wrote (11734)	12/9/2001 4:20:43 PM
From: Louis V. Lambrecht	Read Replies (2) of 74559

CobaltBlue Under a 100% reserve standard ROFL. When you ask for a credit at the bank, the bank will ask you for collateral (garantees and so on). In their bookkeeping, the banks would enter your collateral as "mortgage and guarantees" on one side, and the money lent as "redeemable lending" on the other side. Perfectly balanced assets vs. liabilities. 100% reserve. OTOH, your cash deposit is booked as an asset: "cash" and can be used to allow credit to thirds ( ratio 8:1 without debt securitizatin which can extend the ratio to 8^2:1 <vbg>) In fact, they lend you money on nothing but your appearance. This is called M3. 100% backed on nothing but yourself.

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