Timeline for Why do banks give small APR loans
Current License: CC BY-SA 4.0
9 events
| when toggle format | what | by | license | comment | |
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| May 12, 2018 at 20:48 | comment | added | Jeutnarg | An FDIC-insured deposit cannot be used for stocks, bonds, mutual funds, life insurance policies, annuities or securities. If you are really focused on that topic, please ask a separate question (perhaps on a different SE site) like "What restrictions are placed on deposits held by a commercial bank in the US?" | |
| May 12, 2018 at 7:25 | comment | added | Douglas | That would be a legal or regulatory restriction on what banks are allowed to do with the money they aren't keeping in reserve, then, and it is not obvious to me from your answer that such a restriction exists. | |
| May 11, 2018 at 23:40 | comment | added | Jeutnarg | @Douglas yes and no. Yes in that the money does go back into circulation. No in that I doubt that you can use fractional lending to make the investment - effectively a fractional rate of 100%. Even if you are allowed to have some rate below 100%, I believe that the regulatory bodies would raise the percentage, thus decreasing the multiplier. I can't really dig much deeper - although if we can find an official in the FDIC, we might be able to | |
| May 11, 2018 at 22:32 | comment | added | Douglas | Wouldn't the same logic apply to money spent on stocks? Either way it's money that ends up belonging to someone else, and that will likely find its way back into a bank savings account after some number of transfers. | |
| May 11, 2018 at 21:19 | history | edited | Jeutnarg | CC BY-SA 4.0 |
add note on the mechanics of money supply multiplication
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| May 11, 2018 at 21:04 | comment | added | Jeutnarg | @Douglas forgot to mention the cycles involved. It actually works out to about a 10x multiplier when you run the cycles through infinitely (which you do at scale) | |
| May 11, 2018 at 20:36 | comment | added | Douglas | Fractional rates are for savings accounts, how much of the money that people deposit into the bank they have to keep on hand ready for withdrawals. Banks can get away with keeping only part of it because most of the time people are willing to leave most of their money in the bank indefinitely. That doesn't apply to loans - whoever they're loaning the money to is not going to accept getting just 10% of the money and pretending it's the whole amount. | |
| May 11, 2018 at 16:29 | vote | accept | xyious | ||
| May 11, 2018 at 14:22 | history | answered | Jeutnarg | CC BY-SA 4.0 |