@43d7c4ea Houses aren't liquid assets, but if we put some of our savings into shares then we have exchanged our money for (a share of) property that isn't money. But we haven't lost that money, and we can easily get that money back by selling the shares. Shares aren't money, but they look a lot like money.
There is a parable about a rich man who visited an island and paid by writing cheques. The islanders never bothered to cash the cheques, but just treated them like bank notes.
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@f915ade0
it can exist on both sides of the balance sheet (as an accounting identity) - it is both a liability (in that the money has to be paid out) and an asset (because it is generating an income from repayments.
So as long as banks can find willing (and relatively safe lenders), the two sides of the balance sheet cancel out, meaning they can issue more & more loans without worrying about capital sufficiency.
Its only when people stop paying the accounting identity fails 2/2 - but 1 more
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