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Thursday March/9,/2017 - 6:55PM (UTC) Bank and money - There are still those who think that money is guaranteed by real value with goods and / or
securities and some say that all banks can create money out of thin air
indefinitely. Both are wrong. Apart from the central bank, which can also
create money to buy bonds, all other commercial banks create money out of
thin air only through the loans. When a bank makes a loan, simultaneously
it emits the given currency. It creates out of nothing. And
asks on the loan interests. For the bank, the loan becomes a credit and
currency issued (which can also be deposited at
the same bank: this is why it is said that loans create deposits, and not
vice versa) becomes a debt. But the bank can not
issue currency indefinitely (otherwise there would be no banking crises).
When who has received the loan takes the money, or pay with that money the
customer of another bank, the bank that granted the loan should have equal
amount of money to an account at the central bank. The money on the central
bank account can be derived from the capital of
ordinary credit bank, from the savings of its customers or by the central
bank loans secured by securities accepted by the central bank (the
so-called eligible assets). If it does not receive eligible assets, the
central bank does not lend money. The eligible securities are those have a
high enough credit rating and are issued by
governments and companies. If a bank suffers losses for an amount in excess
of the eligible titles of which has, no longer able to make payments and it
becomes insolvent. As Lehman Brothers in mid-September 2008. The problem is
that almost all government bonds, although they are
considered eligible, would be bad if they were not constantly
refinanced. And, for rifinanziarli, the central
bank issued new currency, therefore not worth anything because its equivalent
securities issued by governments that without the new money could never
repay their debts. It's like a cat chasing its
tail. Until it falls to the ground stone dead. We are almost there. Then, it's time to EkaBank. If it is not too late. RMG
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