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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 427.64-3.9%4:00 PM EST
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To: bruiser98 who wrote (108635)11/28/2014 2:50:14 AM
From: Haim R. Branisteanu  Read Replies (1) of 219967
 
In banking a bank can leverage itself to 1:20 or 1:10 equity to balance sheet. The money generated is not from thin air.

You can also buy US treasuries on margin with 5% down and all or a sudden with a mere $10,000 you in theory control $200,000 in Uncle Sam debt, but you cannot take it home until you pay in full the $200,000 to your broker who keeps it as collateral.

Banks do the same but are permitted to lend out part of the $200,000 to credit-worthy borrowers, and that is the regulators job to verify the credit worthiness of the borrowers and the leverage the banks take which in general in the real world does not exactly happen as banks engage in a lot of trick that are "off balance sheet" like Lehman Bros and then you have a collapse of the system if the truth leaks out and a panic ensues.
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