Comments on: Understanding Debt, Risk and Leverage http://betterexplained.com/articles/understanding-debt-risk-and-leverage/ Learning shouldn't hurt. Let's share the insights that made difficult ideas click. Fri, 20 Nov 2009 14:09:06 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Home loan tax deduction is/maybe no more « Business Pandit http://betterexplained.com/articles/understanding-debt-risk-and-leverage/#comment-250054 Home loan tax deduction is/maybe no more « Business Pandit Tue, 18 Aug 2009 08:29:30 +0000 http://betterexplained.com/articles/understanding-debt-risk-and-leverage/#comment-250054 [...] 2. Home loan tax breaks encourage taking home loan even if you can save (partially or fully) for buying the house. Or if buying a house is more trouble than it is worth for you because of the mobile nature of your job, so you prefer renting. Encouragement of loan taking leads to over-leveraged consumer behaviour, similar to the US sub-prime mortgage trouble. Read up on the dangers of over leveraging here and here. [...] [...] 2. Home loan tax breaks encourage taking home loan even if you can save (partially or fully) for buying the house. Or if buying a house is more trouble than it is worth for you because of the mobile nature of your job, so you prefer renting. Encouragement of loan taking leads to over-leveraged consumer behaviour, similar to the US sub-prime mortgage trouble. Read up on the dangers of over leveraging here and here. [...]

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]]> By: Martino Cuevas http://betterexplained.com/articles/understanding-debt-risk-and-leverage/#comment-226587 Martino Cuevas Thu, 19 Feb 2009 01:14:26 +0000 http://betterexplained.com/articles/understanding-debt-risk-and-leverage/#comment-226587 @ Kalid I made a mistake. I checked wikipedia and found the reserve ratio is 9:1 or 10%. ( not 10:1) I also found out that savings accounts and CDs have no reserve ratio, which seems odd, and lots of countries have very low or zero reserve ratios. There must be a portion of each loan that isn't deposited in another bank, and that must limit the money supply. When those unknown circumstances change, it could cause uncontrollable changes in the money supply. @ Kalid
I made a mistake. I checked wikipedia and found the reserve ratio is 9:1 or 10%. ( not 10:1)

I also found out that savings accounts and CDs have no reserve ratio, which seems odd, and lots of countries have very low or zero reserve ratios. There must be a portion of each loan that isn’t deposited in another bank, and that must limit the money supply. When those unknown circumstances change, it could cause uncontrollable changes in the money supply.

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