Monday, 11 August 2008

Financial basics - Banking Part 4

Where were we? Oh yes...... (thank you, Moroes.)

If the person who makes a deposit in the bank agrees that the banker can loan it out, nothing really changes apart from the person to whom the money must ultimately return to.

This is important - once the depositors have their goods/money/whatever returned to them there are no debts.

If this seems a little weird - consider this analogy. I borrow a teddy bear from you and tell you I will return it to you the following day, but will take it home for now. On my way home I meet a guy who smoking, and I want a cigarette. The guy agrees to trade the teddy for the ciggy and I smoke it.

The smoking guy takes the teddy and he returns home. On the bus home he trades the teddy with the driver in exchange for the ticket. The driver goes to the pub that night and meets you. You love these teddy bears and the driver knows you know how to look after them. You offer to store it for him. He agrees and now you have the bear back.

The real questions at this time are -

Do I still owe you the Teddy bear?

If I do is it possible for me to provide you with it?

Is the driver owed anything and if so who owes him?

Is the banker acting from ignorance or malice?

I'll say what I think tomorrow......

1 comment:

builder said...

you are tending to want to create things that do not exist.

If you borrow my teddy bear and only borrow it then when i get it back then you owe nothing *to me*. But if i unknowingly offer to look after my own teddy bear that has now apparently become the property of the bus driver after he exchanged it for the bus fare after you fradulently sold it for one cigarette then we have a problem that has to be unravelled in a way that satisfies all parties involved after the effects of the criminal sale of the teddy by you was begun.