http://www.timesonline.co.uk/tol/new...cle4795058.ece
Panic is especially dangerous for banks. For banking is, quite literally, a confidence trick. At their simplest, banks take in people’s savings and in return pay them a small amount of interest. Since the banks don’t expect everyone to want their money back simultaneously, they can make loans worth far more than their deposits. Like a pyramid seller, they often end up paying interest out of new money they are taking in.
HTH
Panic is especially dangerous for banks. For banking is, quite literally, a confidence trick. At their simplest, banks take in people’s savings and in return pay them a small amount of interest. Since the banks don’t expect everyone to want their money back simultaneously, they can make loans worth far more than their deposits. Like a pyramid seller, they often end up paying interest out of new money they are taking in.
HTH
Comment