A bank accepts your money as a deposit, pays you a very low interest rate, and then loans that money out, at a much higher interest rate and this is a form of deposit creation that works almost like one bank, because a good percentage of the money loaned out usually makes its way back to another bank, sometimes even the same one.

Fundamental to this deposit creation principle is the amount of the deposits that are lent out and how much cash is kept in reserve. Added to capital repayments, interest payments on loans and the bank’s own capital base this system ensures that there’s always enough money in the bank for every depositor. For years banks worked this as a sort-of confidence trick – the notional value of deposits and liabilities to be paid by the bank exceeded the value of money on the market. Since only a very small number of depositors demand cash withdrawals at the same time and almost all these paid-out deposits are deposited in a bank again quickly the banks ensured that every depositor got his money while circulating money in the economy and stimulating growth. The loan-deposit ratio was a self-regulating tool.

Now, it’s a fact that the inflation index does not take into account the growth of share price and as a consequence the market will run out of cash to pay for shares at some point in time; as everything goes along. The only way would be down—a shares price crash.

This is the problem that came when banks began investing in hedge funds and derivatives and leveraging themselves whereby their capital outlay went way, way over 100%; in other words when they took in a dollar deposit they already had two dollars out; in other words it was an accident that was just waiting to happen and of course it did and continues to and it is too late for banks to go back to the tried and true banking method that worked for them for so long because the derivatives have no worth anymore and many can’t even be located.

Good luck to us all in the future. I believe it’s not what happens to you that matters as much as what you do with what happens to you and the ball is in Barak Obama’s court; I really hope that he knows what he’s going to do because the U.S. of A. is, right now, like an old car with too many miles on the engine and if we don’t do a complete overhaul it’s going to die before we ever get to where we wanted to go and I just hope it's not too late. Maybe if Barak's as good at fixing the economy as he is at shooting hoops we'll make it yet.