Did you know that when you deposit $100 in a bank, the bank can legally lend $90 of that to someone. That someone then buys something with the $90 and it gets deposited at another bank, which then can lend $81 to someone who then buys something and it gets deposited in another bank, which can then lend $72.90 to someone who then buys something and it gets deposited to another bank, which can then lend $65.61 to someone who then buys something and it gets deposited to another bank, which can then lend $59.05 to someone who then buys something and it gets deposited to another bank, which can then lend $53.15 to someone who then buys something and it gets deposited to another bank, which can then lend $47.84 to someone who then buys something and it gets deposited to another bank, which can then lend $43.06 to someone who then buys something and it gets deposited to another bank, which can then lend $38.75 to someone who then buys something and it gets deposited to another bank, which can then lend $34.88. After 10 of these transactions, the initial $100 deposit is supporting $586.24 in loans. You earned maybe 1% interest (=$1) on the 1 year deposit while the bankers made maybe 8% on the $586.24 in loans ($46.90) in the same period. And that, my friends, is the primary reason why prices keep rising for us and bankers make a lot of money.
Posted on: Thu, 24 Oct 2013 05:59:25 +0000
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