how bank loans work, page-3

timber instead of insulting the poster why don't you actually read what he wrote and take your own advice. The OP already knows about the security deposit that's required for the reserve ratio.

Banks are fully able to create credit out of thin air as long as its within their reserve ratio and they have enough working capitol to sustain their day to day operations. That's how banking works. The whole system is a closed loop, it doesn't matter if one bank writes some numbers into their borrower's account that they dont have. If they don't have enough they can just borrow from other banks as well as the central bank. Not to mention they can buy credit default swaps and interest rate contracts from other banks offset their exposure. All the while profiting from interest they're getting from the real economy.

How do you suppose banks are just like us as you say? Can I lend $100 to you for a $10 security, you lend me $100 for a $10 security, do it 1000 times then we both become millionaires? (Ok number might be 999-something but whatever) Nope, but with a banking license you can.