It has recently been much talk about the financial stability of banks. Given the great custodians of taxpayers' money and the great virtue of the capitalization of some banks, there is obviously a great need for change in some of the structures of capital reserves banks. Banks were always under pressure to increase from the "Committee on Banking Supervision" of the reserves and avoid another blow to the global financial system. Currently, banks are required to keep 7% of their reserves and plan for the reserves, increased by 8% - 9.5% of the total population, and changes in three years to implement. Based on the massive bailout, the book prior to this apparently is not close enough and more than a political ploy to show that they are trying to make a change for the good of the global financial system is happening. I agree, a step in the right direction is not that it's not nearly enough.
This type of reserve requirements is not sufficient because the system of fractional reserve banking to a bank customer deposits and loans has a reservation to other provisions which in turn artificially increased the offer to save money.
For example, if $ 100 deposit in a bank, the Bank is committed to a small portion (eg 20% or $ 20) to hold in reserve. The remaining $ 80 paid to another person. Now, where is the money in another bank that a reserve (about 20% or $ 16), and, for $ 64 deposit holds. This means that the first deposit of $ 100 borrowed in total reserves of $ 36 ($ 20 + $ 16) and $ 144 ($ 80 + $ 64). So instead of paying $ 100 to $ 180 banks in the money supply have created in the economy.
There is a big problem, because this is how the banks got into trouble in the first instance, pay more money than your account balance cannot be maintained if all his problems. In addition to causing inflation by increasing the money supply. Help if an increased supply of money, the functioning of the economy, but at what price? Connected because of my experience in real estate and investment loans and the risks to the system, I can tell you that the banks have proper risk assessment. They are more indebted, and the government is the security (also known as the tax dollars issued, the government said that if you save one billion it without losing legal consequences, what would you do? In fact, exactly the what banks have done, and were saved, unless there are ways to find profit from the big screen at the same time. Thus, not only money to lose, by the taxpayers through the bailout, they earn more money in their own rescue plan. There is something fundamentally wrong with this system and should be changed to a stable world economy in the future.
Owens Mathew Owens Consulting Group is one of the founders of the California CPA license and a full-time investor in real estate. Matthew has 8 years experience as an auditor, accountant and business consultant and has completed over 100 transactions in the last three years, which is about $ 10 million in real estate, most of which are sold for cash investors.