All in the Name of Liquidity
http://www.fogcityjournal.com/wordpress/3226/pulling-back-the-curtain-on-the-wall-street-money-machine/

quoted from link
What is this need for “liquidity” that justifies such extraordinary measures on behalf of the banks? Why do banks need cheap and ready access to funds? Aren’t they the lenders rather than the borrowers of funds? Don’t they simply take in deposits and lend them out?

The answer is no. Today when banks make loans, they extend credit FIRST, then fund the loans by borrowing from the cheapest available source. If deposits are not available, they borrow from another bank, the money market, or the Federal Reserve.

Rather than loans being created from deposits, loans actually CREATE deposits. They create deposits when checks are drawn on the borrower’s account and deposited in another bank.

These deposits can then be borrowed back at the Fed funds rate—currently a very low 0.25%. A bank can thus create money in the form of “bank credit,” lend it to a customer at high interest, and borrow it back at very low interest, pocketing the difference as its profit.

If all this looks like sleight of hand, it is. The process has been compared to “check kiting,” defined in Barron’s Business Dictionary as:

[An] illegal scheme that establishes a false line of credit by the exchange of worthless checks between two banks.

For instance, a check kiter might have empty checking accounts at two different banks, A and B. The kiter writes a check for $50,000 on the bank A account and deposits it in the bank B account.

If the kiter has good credit at bank B, he will be able to draw funds against the deposited check before it clears, that is, is forwarded to bank A for payment and paid by bank A.

Since the clearing process usually takes a few days, the kiter can use the $50,000 for a few days and then deposit it in the bank A account before the $50,000 check drawn on that account clears.

and if you think this dont relate to you
http://www.tomatobubble.com/id39.html
http://www.blacklistednews.com/Shocking_Charts_And_Statistics_That_Prove_That_America_Is_No_Longer_A_Wealthy_Nation/16922/0/38/38/Y/M.html

why cant you comprehend?
http://www.salem-news.com/articles/december082011/academic-freedom-mk.php

to quote the tomato link

""To feed the insatiable debt monster,
and to maintain confidence in his notes,
Mortimer""..[the fed reserve banker]..must have a perpetually growing GDP..(ever more tomatoes).[by promise of ever more paper tomatoes]..fiat money

""If not,..runaway debt and inflation
will cause the economy..to implode..sooner,rather than later.

GDP growth is fueled by "consumer spending"(consumption)..
and the constant borrowing*..which enables it...

This is why economists, politicians,..and other assorted lunatics..are so obsessed..with constant GDP growth.

""The tomato .[[real money;coin]..must no longer serve as the backing for our currency...To meet the liquidity needs..of our new exclusive money franchise/system,..it is imperative that we get this town..off of that antiquated,"barbaric fruit" Standard"">.(hard money)

""and transition..to my expertly managed
paper currency."..(fiat money)..and then virtual cyber..lol credit

"As far as the poker markets go,
now is the time to play even more aggressively..(buy low).

We'll meet again next month...In the meantime,
work harder and bring more tomatoes..to the next game,..[;real assets..mortgauged to the bank]..

I'll print more notes to increase liquidity
and induce the banks..to loosen up credit..
once again..(pump priming,
quantitative easing)

"If the local banks..need to make more loans,
I'll lower their reserve requirements..''

[real asset
that underpins their acces to 'credit']

''so that they can lend..(create)..money that they don't have.
[to get real assets they want..that we hold kortgauge over]

As long as too many depositors..don't make withdrawals ..""

[or pay off all their debt..PLUS
take back..their real assets]..

''they'll be none the wiser."
(fractional reserve banking)

Even if there is a bank run,
or if the bank's loan demand exceeds it's reserve requirement,..""I'll act as the "lender of last resort"

(Federal Reserve,..established in 1913..[sold for a measdily 44 billion]..BUT ABLE TO BE BOUGHT BACK FOR THE SAME AMMOUNT...

and lend..(create money for)..to
the local bank..*at interest(Bank takeover,Discount Window).

recalling we hold inflation to devalue assets

but only put in money..[with debt attatched]
the intrest must come
from others defaulting

as govt show..only their promise of value..[asset/bond]
gets them the money..but with ursury/intrest added...
plus only paying the intrest..the debt stays at trillions

[one third usa tax take goes just to intrest]

I will also lend to (create money for) the Mayor's office (Open Market Operations, purchase of T-Bills, stimulus) , and bail out (create money for) the Tomato Street Brokerage houses that I deem to be "too big to fail" (Goldman Sachs, JP Morgan bailout package).

Let the good times roll!





I continue: "Finally, I will organize an emergency meeting of the Mayors, Finance Ministers, and Note Printers of the European towns (G-20, "world stage").

Now is not the time for isolationism...(independence, sovereignty)Global problems demand global solutions!..(IMF, World Bank, WTO, UN)."

lol govt serrvuing the people
now govt serves the dead inc-corperated..system

"We will recover...So keep spending,
secure in the knowledge that the best
and the brightest of the world community are on the job.

taking what they want
and leaving the nuthin for the rest of you

We have nothing
thus have left..to loose
http://www.blacklistednews.com/Shocking_Charts_And_Statistics_That_Prove_That_America_Is_No_Longer_A_Wealthy_Nation/16922/0/38/38/Y/M.html

Sorry, one under god.

What point are you trying to make?

Instead of just cut'n'pasting from sites that take your fancy, start trying to understand the system from the bottom up. For a start, reconsider this cut'n'paste of yours:

>>Today when banks make loans, they extend credit FIRST, then fund the loans by borrowing from the cheapest available source. If deposits are not available, they borrow from another bank, the money market, or the Federal Reserve.<<

Explain to me the difference between a) borrowing funds at 12:01, and lending them at 12:02, and b) lending funds at 12:01, and borrowing them at 12:02.

Where b) is concerned, the amount of funds lent cannot exceed their requirement for prudential reserves anyway, so in terms of bank risk management the situation is substantially identical in both examples.

If you have a problem with moneylending in general, then no system in the world is going to feel comfortable to you. But to pick on this one aspect of today's financial engineering as being somehow relevant or noteworthy, seems to indicate a lack of knowledge, rather than evidence of wrongdoing.

quote]
''Where b) is concerned, the amount of funds lent
cannot exceed their requirement for prudential reserves anyway,[/quote]

mate govt servants working for pennies
in the hope to eventually get into the big money

dont ask questions
its like moodies rating stocks
it they rate right..its a self fullfilling prophecy

so they delibweratly rate wrong

so we get AAA+
from b grade fact

its become so complicated..even expert's
got no idea..who is next in line..its just process
and knowing that govt isnt watching..cause it's workers..want in

"""..so in terms of bank risk management
the situation is substantially identical in both examples."""

nuthing new under the sun
its been done before..by better and worse than you

boom is followed by bust
in the end its who's captial the capitalista play with?

your incvestment..your pensions..your savings

and that ol boy isnt any worry
because they are too small to protect from failing
much better we protect the thieves..much too big to fail

well ol mate
the ones with the most to loose
will loose the most..

so put your savings/pension.. on the line
to get less..than the cost of inflation

cause they
who think to have the most...have the most to loose

im over it

hope you buy up big
on the eu pew bailout

its clever how you ignore posts
till you got a point..to try to refute
in the end criminal treason..has its paybacks

Yes indeed, one under god. How tricky is that...

>>its clever how you ignore posts
till you got a point<<

I find it saves a lot of time, ignoring the posts that don't deserve comment. Or indeed, those that are so truly incomprehensible, an answer would consequently be equally meaningless.

Your style, in contrast, is to keep very quiet when your assertions are shown to be incorrect, while carefully ignoring any questions that might take you beyond your level of comprehension.

An example of the latter would be my last post, where I asked that you...

"Explain to me the difference between a) borrowing funds at 12:01, and lending them at 12:02, and b) lending funds at 12:01, and borrowing them at 12:02."

The only reason I asked the question was - not to show up your lack of understanding, that would be cruel - but to illustrate to you how dumb are the people from whom you seem to draw your views. It is, after all, the crux and core of the argument that you linked us to - banks lending before they fund the loan. Which they have been doing for decades, by the way.

Have a great - and worry-free - day