The Pi Pirate
New member
- Joined
- Mar 5, 2006
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- Political Leaning
- Very Liberal
LowBrassNinja said:Well I don't know too much about the stock market, but I know how new money is created through banking. Harry Hotshot deposits $10,000 in a bank. Let's say the reserve requirement is 10%, which means that the bank must have 10% of all deposits in their vault at all times. This means the bank has $1,000 in the vault and $9,000 to use as loans. The bank loans the money away to new borrowers, who spend it at other locations. These locations then deposit the money in other banks (or the same bank), effectively adding a new $9,000 to other banks. This process continues until the last bank can only loan 1 cent from this initial $10,000 deposit from Harry Hotshot. You can do all the math and it will turn out that a new $90,000 will enter the banking system.
And yes, you do sell sell sell when you're stocks are high, to people who think it will be a good investment and will continue to rise.
Hope that helps.
Maybe.
The Pi Pirate said:OK, so let me see if this is correct:
Alfred has $100 that he got from an outside source.
He puts it in the bank, which loans out 90% to bob, keeping 10% of Alfred's account.
Alfred's account: $100
Bank vault: $10
Bob's cash on hand: $90
Bob puts his in the bank, which is required to keep 10% of it - so it keeps $9 and loans the rest to Cindy.
Alfred's account: $100
Bob's account: $90
Bank vault: $19
Cindy's cash on hand: $81
Cindy then puts HER money in the bank, which is required to keep 10% (we'll say $8). Dorothy borrows so
Alfred's account: $100
Bob's account: $90
Cindy's account: $81
Bank vault: $27
Dorothy's cash on hand: $73
Then
Alfred's account: $100
Bob's account: $90
Cindy's account: $81
Dorothy's account: $73
Bank vault: $34
Edward's cash on hand: $66.
OK, so total account money:
$344
Bank vault
$34
In effect, Alfred, Bob, Cindy and Dorothy all have the same money. And if any of them decide to close their accounts, or withdraw it all, not good! In fact, they don't even need to withdraw more than half.
It is true that <some person's cash on hand> + <cash in the bank vault> will never exceed $100. However, the total value of all bank accounts can. This means that as more and more people get accounts, the amount each has to draw before breaking the bank will decrease.
I believe this is called a run on the bank.
GySgt said:It's used to buy women.
Also, if you have a stock, and it gets really high and probably won't get much higher, you'd sell sell sell right?The Pi Pirate said:OK, so as best as I can tell, money seems to 'appear'; that is, I'm told that person x winning q dollars in the stock market doesn't nescesarrily mean person y loses q dollars. Nor is it spread out.
Also, if you have a stock, and it gets really high and probably won't get much higher, you'd sell sell sell right?
But to WHOM?
I don't understand these. Someone help me out!
But to WHOM?
The Pi Pirate said:OK, so as best as I can tell, money seems to 'appear'; that is, I'm told that person x winning q dollars in the stock market doesn't nescesarrily mean person y loses q dollars. Nor is it spread out.
Also, if you have a stock, and it gets really high and probably won't get much higher, you'd sell sell sell right?
But to WHOM?
I don't understand these. Someone help me out!
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