Banking 7: Giving out loans without giving out gold

How banks can give out loans without ever giving out gold.

Category:

Education

Tags:

• banking
• loans
• finance
• economics

[FranceParisian]

In fairness to nemnaisa; his got a point and he is trying to critique the bad side of the system. Remember a system is only effective if the rest of its parts are working properly.

[mustafasohail456]

how sal knows many things



[peleok1]

Sal for president!

[LieDownAndSing]

at first i tot somethings wrong wif my speaker lol

[clray123]

@1980littleboy Regardless of commodity backing money is a legal tender in the sense that you can get government services in exchange for it. So figuratively, you can say it's backed by the soldier, the policeman, the doctor, the fireman, essentially anyone employed by the government, and of course also by the goodwill of all other (private) users. When push comes to shove, I would certainly prefer to have my money backed by a guy with a gun rather than by a shiny metal.

[clray123]

@ojdidit34 What Sal doesn't mention is that loans normally have a collateral. To obtain a loan, D must first prove his creditworthiness somehow - either by convincing the management that his project is uber-excellent or (more realistically) by temporarily transferring some of his property to the bank. This property forms the "collateral", which can be taken away from D by the bank in case he doesn't pay back the loan.

[clray123]

@kourosh89 Wikipedia: "Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the more restrictive sense of liabilities excluding shareholders' equity."

[kourosh89]

Is equity a liability???

[tIs4gatorbait]

Twilight zone

[juliusreea]

why on previous videos loans for investments were on assets side and now(loan) they appeared on liability side?

[badjouras]

@ojdidit34 Bank of Sal lent 100g to D in the form of a checking account. So D paid A with borrowed money from the Bank of Sal, which expects D to pay back his loan. At least this is how I understand it.