[danielmarkbruce]

Who said anything about physical collateral?

I can make an unsecured line of credit available to you, and until you try to draw on it, you don't know if I have the ability to fund it. Same problem if the loan is supposed to be secured by your car. There is no magic you can come up with that changes that. Now if you are smart, you'll have done some diligence on me, and I might have a credit rating you can look up. Or someone in your org might be tasked with analyzing the credit and liquidity risks of all their counterparts. If it worked like magic, no one would bother doing this... but they do.

Correspondent banking makes up a tiny percentage of bank to bank settlements. "merely collateral optimization" makes the central bank role sound almost meaningless. Having credit risk and liquidity problems is kind of a big deal.

As for the comments on what the central bank is doing - it doesn't change the fact that banks can't make money out of thin air. If you look at the link above/below for WFC's balance sheet - every asset on their books is funded by real liabilities (plus some equity).

[neilwilson]

"Who said anything about physical collateral?"

Anybody who is actually making a loan, rather than playing rhetorical games.

Banks are discount houses. They allow us to spend real things.

Except for the bank serving government, which discounts the power to tax.

[danielmarkbruce]

Credit cards are not secured by collateral. A good chunk of corporate loans are unsecured. Just take a look at a real balance sheet of a real bank. Wells Fargo has over $50 bill of just credit card loans. No collateral.

A statement isn't a "game" just because it's inconvenient.

Go through the balance sheet of one of the banks. You'll learn a lot. It will become real instead of some theoretical thing. You'll see how the assets are funded by the liabilities (deposits). You'll see that banks really can't make up money out of thin air.

Here is a simple, real, publicly listed bank in Hawaii:

https://www.sec.gov/ix?doc=/Archives/edgar/data/36377/000155...

Go to page 100 and check out the balance sheet. They have about 13 bill of loans out. They own a little over 8 bill of mortgage backed securities. Their total deposits are about 21 bill. Is this some strange coincidence? Of course it isn't.