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Old 31-10-2017, 10:00 PM
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Adlerhorst Adlerhorst is offline
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What CDM is talking about in easy terms

Suppose you want to buy a house. You go to a bank and ask to borrow 1m. The bank assesses you and makes a call on whether you are good for it. It agrees to lend you 1m.

Now it doesn’t actually give you money. Let’s pretend it doesn’t even have 1m. It presses a button on a computer and the computer says you owe it 1m and it owes another bank (the bank who the person who you bought the house from banks with) 1m.

Now suppose that other bank lends 1m it doesn’t have to another person to buy a house from someone who banks with the first bank. It is owed 1m from that person and owes the first bank 1m.

At the end of the day both banks owe each other 1m and it is balanced. Yet the balance sheets of both banks have been grossed up by 1m which is entirely new. And the banks are now getting interest on this money. The interest they make from the two borrowers is more than they pay on the deposits.

That’s an extremely basic version of what he is saying. The next thing he will say is it is outrageous the banks make money on this as they created the money themselves.
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Last edited by Adlerhorst; 31-10-2017 at 10:03 PM.
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