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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Dan3 who wrote (251612)	6/3/2010 2:32:38 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 306849

Dan, this is what i was trying to communicate... creditcrunchcookbook.com So, if Mr. Smith the goldsmith has 50 pounds of gold in reserve, he will issue 50 pounds in receipts initially to the depositor(s) of gold. But because the depositor(s) will not redeem the receipts immediately all at once, he lends out another 450 pounds in receipts to various borrowers. This brings the total amount of receipts that Mr. Smith has issued to 500 pounds of receipts. Similarly, Ms. Banks has 50 pounds of gold on deposit for which she issues receipt(s), and lends out another 450 pounds of receipts bringing the total amount of receipts that she has issued to 500 pounds of receipts. >>The bank can only loan out a fraction of what it has<< i think they only need to have a fraction of what they have lent out on hand - as explained in the example, above. 50 in, 500 out. the system will fail 100% of the time - to a mathematical certainty. the only variable is time to failure. all the derivatives and insane leverage most definitely accelerated the process in dramatic fashion. again... In other words, FRACTIONAL RESERVE lending allows the commercial banks to create 9 times more money then they have on reserve. The banks lend money they don?t have financialsense.com i think the system works a bit different than you think it does. this deception is by design, imho.