Re: Re: Catalonia asks for 5 billion bailout

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In reality what a shrinkage of the deposits with that size means when you are using fractional reserve banking is that the ability to finance other things have gone down 90-95 times as much depending on what sorts of credits you are talking about. With the ways the banks have been faking numbers it could in reality be 200 times as much. So if customers pull one billion in deposits it means that people looking for financing gets a much harder time to find it. 90-95 billions less. Imagine how this affects the way investments are made. This will raise interest rates extremly if it’s not kept down artificially by the eurozone by pumping new money into the system.

Understanding fractional reserve banking is a must to understand how horrible the state of the worlds economy is in at the moment.

If Spanish banks would use true valuations on their porfolios on for example real estate it would mean ridiculous amounts of new deposits needed to ofset the drops in market value of said porfolios. This is what most people don’t understand and why it’s a pyramid scheme waiting to come down. Only way they know how to handle it is to print new money to offset this … by making the population poorer.