Forex & Tradings

Banks create money, bank cards because they do legally, which would take the rest of us in jail if we tried. The most powerful tool of money creation is the fractional reserve capacity. According to the rules of its charter, the banks have to obtain only a fraction of their deposits as reserves in the form of cash or other liquid assets. sets in the U.S. Federal Reserve (Fed) to be specific for the percentage of banks to hold in reserve. The rate is usually between 3% to 10%, depending on whether the central bank wants to enlarge or reduce the money supply. Federal banks, commercial banks and savings banks (Sparkassen) has its own rules, to give money from bank to bank cards. Although I am simplifying a complex process essential point here is that banks create money by lending more in the same classification, provided the banks are required to keep part of the reserve cash deposits. It is worth noting that the Federal Reserve allowed in the rule five fifty-five times the sum of the loan and the amount on deposit. use one of the most important sources of funds for banks to earn more money, are mortgage loans. A mortgage is a bank book value, but cash is an asset. Do you want to know how the bank can you use your mortgage to create money? One option is to sell your loan to another bank. Now the bank has cash from the sale of your loan. You do not have a loan but your credit is to cash in the bank, after which the bank an asset into cash, could do with the loans to others, has transformed means. Another way is through the securitization of mortgages. In this process, sold the packages of mortgages and bank loans based on mortgages then. Securitization of mortgage offers cash to the bank and for use as capital to create new loans to other borrowers. Another way your mortgage can make money if you buy a house from a seller and the seller is paid by the bank through a mortgage, and then the seller has to pay and deposited in a bank if your bank or another. This adds more cash deposit in the money supply as a consequence of the creation of the loan to finance your mortgage. Any mortgage creates more money in the money supply, the potential in order to create more money. can This is just one example of the potential for banks, the loans created on paper and turn paper into cash loans in order to create more loans in the newspaper for more money. Essentially, banks create more money into the economy through the creation of several loans in the same deposits. 206F