In the stock brokerage example, we're told:
>They might allow you 2:1 leverage when you buy stock: your $1,000 buys 20 shares now.
But then a couple of paragraphs later:
>But you now owe $1,000 to your brokerage, and are 1:1 levered
My brokerage offers 2:1 leverage, which results in me being 1:1 levered? I think I understand what patrick is saying here but I also find it hard to follow
On the other hand:
>One is that, because people can ask for money from their checking accounts at any time, impecunious operation of the bank could cause the value of the mortgages to be impaired just a tiny little bit at a time when people need most of the money in their checking accounts.
I've read this four or five times and I don't understand the chain of cause-and-effect here at all. Why does "people can ask for money from their checking accounts at any time" mean that "impecunious operation of the bank could cause the value of the mortgages to be impaired just a tiny little bit at a time when people need most of the money in their checking accounts"?