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We agree that the amount of loans roughly matches the amount of deposits. Lots of people (like beambot I believe) think there are 10x more money lent out than d
by zz865 5y ago
We agree that the amount of loans roughly matches the amount of deposits. Lots of people (like beambot I believe) think there are 10x more money lent out than deposits.
- beambot 5y agoNope. GP said that storing money was expensive. I was simply alluding to the fact that (a) supply of physical dollars << assets on the balance sheet - i.e. fractional reserve, and (b) a trusted authority can 'print' money on demand so long as people have faith in its viability - i.e. central banks & federal reserve. Bank financing is counterintuitive: deposits are actually liabilities, and loans are assets... but banks also routinely borrow money (e.g. from the Fed) well in excess of their book value. For example, JP Morgan's current debt-to-equity ratio is 1.675 [1], meaning that they are also (in a sense) "mortgaged" well beyond their net assets. It's debt all the way down... [1] https://ycharts.com/companies/JPM https://ycharts.com/companies/JPM
- zz865 5y agoThanks I've been working in banks for 25 years now and have an accounting degree. JPM debt equity ratio is about 12. They're supposed to be highly leveraged, that is how banking works.
- deleted 5y ago[deleted]