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Tag: FractionaryReserve

The risky game of creating money out of nothing

Bankers get to create money out of nothing, through bank loans, and charge interest on it.

For this system to work, bankers do need to ensure the vast majority of that money gets paid back. But this is where they keep falling flat on their faces, because banking requires prudent lending.

If someone can’t repay a loan, they need to repossess that asset and sell it to recoup that money. This means that if they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

In 2007, as the real estate and stock market collapsed the banks became insolvent as their assets didn’t cover their liabilities. They could no longer repossess and sell those assets to cover the outstanding loans.

So they needed to get most of the money they lended out back again, to balance their books and all the help they could get from the governments.… Read more...

Reserva Fraccionaria y Bancos Centrales

Todos los billetes de dólar que circulan por Estados Unidos son billetes de la Reserva Federal (“Federal Reserve Note”). Ésta los emite como letras de cambio y pide a la Fábrica de Moneda estadounidense que los imprima, pagándole 4 centavos por cada billete.

La Reserva Federal (que es una entidad privada, aunque eso es tema para otro día) presta dinero al gobierno de Estados Unidos comprando bonos del tesoro. Y monetiza la deuda prestando el dinero que debe el gobierno a otros bancos.

Este arreglo se inventó por el Banco de Inglaterra. La diferencia es que mientras el Banco Inglaterra prestaba el oro al rey a cambio de un pagaré, la Reserva Federal simplemente otorga existencia al dinero diciendo que está ahí.… Read more...