Quote:
Originally Posted by Matt 26z
If a bank can lend out 10x the cash they've actually got, where does the money go as the loans are paid back?
Is the cash pulled out of thin air to lend and then when it's paid back it evaporates again?
|
Pretty much. One bank borrows from another bank. The Fed being the ultimate bank. Eventually the treasury gets it's bonds covered but it's more or less as you describe. Out of thin air and back in.