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As you know the only way they can

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eddy2   Sunday, 08/19/18 11:27:03 PM
Re: MasterBlastr post# 6541
Post # of 6553 
As you know the only way they can sell debt is by allowing the debt holders to hold collateral. Example: For every dollar a bank customer has in the bank the bank can lend out twice that amount. This is due too the earnings from the capital relative too the cost of the capital. Let’s use 5% return going to the depositor. Ten percent to the bank for administration fees leaving a five percent spread. Half again goes too administration cost leaving the bank a 2% return a year too pay the central bank interest should the bank depositors want there money back.
The banks too the central banks are service providers. So in other words they are paid too sell the central banks debt if they can collateralize the debt by establishing a revenue source that is positive over the capital cost of borrowing the capital.

As you can see the principal is totally removed. If one principal source gets called then the other must be called forcing them to refinance. If the cost too refinance is greater then the cost of breaking the contract then the bank wins.

Now apply those same principals to a public company.



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