to banking and even less about history or accounting.
If you are getting your information from videos on YouTube chances are you are less educated then if you had not got any information at all......didn't Thomas Jefferson say something like that about newspapers. Especially if you are getting your information from the Money Master or Web of Debt videos.
If you didn't know or don't know that a dollar created by the Fed is a liability you quite simply don't have a clue about banking.
When a bank takes in someone's money it becomes a liability on the balance sheet of the bank, there are regulations that require that the bank keep a certain portion of that liquid in case the person wants it back. The "excess" of the requirement can and is lent into the banking system in the form of Fed funds. They place these excess reserves at the fed and other banks that are short reserves borrow from the system. The Fed controls the amount of reserves to determine the amount and interest they want someone to pay. This is how they control short term rates. There is a 2 week maintenance period in which this takes place....come up short to often and the chances increase that you will be audited.....and no one wants that.
Banks are in the business of borrowing short term and lending long term.....and as long as the yield curve stays positive they earn the net interest margin.
On the other side of the balance sheet,The banks can lend out money and when they do this becomes an asset on the banks balance sheet and yes it is money created out of thin air but the amount of loans are control by the amount of leverage the bank is allowed by regulation, they must maintain a certain amount of capital to remain solvent. Assets = Liabilities + Shareholder Equity.
The trick is how much to hold back and keep in shareholder equity in cash and cash reserves......and how much to lend out either to the Fed Funds market or as an assets....the bank cannot just lend without the restrictions of sound financial judgment.
Every time a financial crisis hits this flawed analysis come out of hiding because people see the banks sitting on all these excess reserves and think that all loans can be created and financed by the Fed......If that was the case then answer this one important question.
Why in the world would the banks need or want securitization?
Your theory just fell apart.
"Before we can ever ask how things might go wrong; we must first explain how they could ever go right"
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