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Monday, May 28, 2012

''The Trouble With Banks''

From Hedged.biz

''There is something wrong with the fractional reserve banking system. It should have become clear post 2008 but it hasn't. 
Banks at their simplest form take deposits, (borrow money) usually short term, and lend money, usually medium to long term. They also augment their short term borrowings with the issue of longer term debt instruments. So banks borrow on the one hand and lend on the other, making a margin, being the difference between the rate at which they borrow and the rate at which they lend.''

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