tag:blogger.com,1999:blog-816559531110064247.post7027152490996262713..comments2024-03-08T01:03:44.522-08:00Comments on Humble Student of the Markets: Banking liquidity vs. solvencyCam Hui, CFAhttp://www.blogger.com/profile/09672203690656029787noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-816559531110064247.post-57848794878101614512011-09-16T11:34:54.726-07:002011-09-16T11:34:54.726-07:00Hmm, so hypothetically, for all banks combined, th...Hmm, so hypothetically, for all banks combined, the total money lend out is a multiple of actual money available. Any idea what this multiple is for the US or Europe? <br /><br />Thanks again. For a physicists, banking is too complex!Seanhttps://www.blogger.com/profile/04648061697945125371noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-33737400846112922532011-09-16T10:56:57.366-07:002011-09-16T10:56:57.366-07:00Sean,
If a bank has $100 in deposits, it can only...Sean,<br /><br />If a bank has $100 in deposits, it can only lend out $100 less some margin of safety.<br /><br />What you are thinking about is the wonders of fractional banking. Suppose Bank ABC has $100 in deposits, it lends out $90. <br /><br />That $90 has to go somewhere. Let's suppose it winds up back at ABC as deposits. ABC can take that $90 and lend out another $81 (90%).<br /><br />...and so it goes.Cam Hui, CFAhttps://www.blogger.com/profile/09672203690656029787noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-58101501768734838442011-09-16T10:28:20.716-07:002011-09-16T10:28:20.716-07:00Very clear explanation, I always learn something g...Very clear explanation, I always learn something good reading this blog.<br /><br />The confusion I have is I hear that if bank ABC gets $100 in deposits, it can lend out $1000. This is not true in typical banking operations? How about investment banks?Seanhttps://www.blogger.com/profile/04648061697945125371noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-49688269563267830972011-09-16T10:28:01.357-07:002011-09-16T10:28:01.357-07:00Very clear explanation, I always learn something g...Very clear explanation, I always learn something good reading this blog.<br /><br />The confusion I have is I hear that if bank ABC gets $100 in deposits, it can lend out $1000. This is not true in typical banking operations? How about investment banks?Seanhttps://www.blogger.com/profile/04648061697945125371noreply@blogger.comtag:blogger.com,1999:blog-816559531110064247.post-58216592697224414532011-09-16T05:51:44.888-07:002011-09-16T05:51:44.888-07:00Nicely explained...thank you!Nicely explained...thank you!Candy Mathesonhttps://www.blogger.com/profile/01198284255857689191noreply@blogger.com