Spanish Property Insight › Forums › Spanish Property Forums › Spanish Real Estate Chatter › Conference in Madrid with Spain’s head of Housing › Re: Re: Conference in Madrid with Spain’s head of Housing
“A bank’s whole existence is based on it being able to lend money, other people’s money to be precise. “
As I understand it, a bank lends you money based on your own asset.So it isn’t ‘other people’s money’ its a the borrowers own money that they have to repay.
At no point do banks actually take money from anyone else, they just assume the risk and take the profit. The money comes from thin air.
My point was that the money the bank lends you is not the bank’s money – it is money the bank has itself borrowed from somewhere else (maybe another bank initially, but ultimately from either accounts held with banks or from central banks). I guess the money does come from thin air in the same way that if I write an IOU for say €100 and people use that IOU as if it were money then I have effectively created €100 and added it to the money supply. The banks make a calculated gamble that they can keep on borrowing and writing IOUs.