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Tag: subprime

From Lehman to Bitcoin: The Subprime Issue

The idea behind banks is that they lend into business and industry to increase the productive capacity of the economy. Business and industry don’t have to wait until they have the money to expand. They can borrow the money and use it to expand today, and then pay that money back in the future.

The economy can then grow more rapidly than it would without banks. Debt grows with GDP and there are no problems. So far so good.

The Problem with Banks

If you could only move real money inside your bank it would be a problem. You also need to send and receive money from other banks. This banks have their own ledgers and every x hours this ledgers are connected to become consistent: that’s the COMPENSATION process, and this is what makes transfers hours and dates.… Read more...