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

To: Skeeter Bug who wrote (251658)	6/4/2010 2:41:28 AM
From: Dan3	Read Replies (1) \| Respond to of 306849

Re: this is what i was trying to communicate... It's not the way that banks work. frbservices.org Strangely, it's somewhat the way the overall system functions as a net system. But it's almost a coincidence. If a bank has $100 million dollars in deposits, it can only loan out ~$98 million dollars (it depends on the mix of deposit and savings accounts). But as a system, most loans wind up as deposits in somebody's bank. So the loan almost (doesn't quite) double the total amount of deposits in all banks (even if the first one doesn't get its $99 million back, it gets deposits from other bank's loans). Then it can loan out 98% of those deposits, etc. But the bank can only loan its deposits out once - it's what happens to those deposits when you view all banks as a system that acts as a multiplier.