What does it mean that institution borrowed short and lent long?it would be great if u may use a comprehensive example.
Thank you very much.
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"Short" and "long" here refer to durations, rather than taking short and long positions on an asset. "Borrowing short" is when banks raise capital by taking deposits that must be available on short notice. "Lending long" is when banks loan out money which won't be available to them for a long time. Discussions of this topic on the internet seem to be by those who think that fractional reserve banking is fundamentally broken, that we should all be buying gold, that the big economic problem today is inflation, or other deeply wrong ideas. I'd be skeptical of information you find on this idea from such sources.