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Another thing relates to what is known as leverage: nowadays financial institutions are leveraged up to ridiculous levels.
So if a bank says that they have so much in one accounting term, if they are leveraged then they don't and this is how they all operate nowadays.
It also means that if these morons make a bad bet to get a price move of 2% when they are leveraged around 50:1, they can become insolvent unless they get a "bailout" which is basically a euphismism for "lets take money from people who aren't stupid and give it people who are" or basically some kind of anti Robin-Hood kind of thing.
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Technical question - where did you get that 50:1? May you link the source? I mean I found for US banks something like average capital ratio of round 10%, which means rather 10:1 and efforts to increase the buffer effectiveness (and size) by regulations prescribed by Basel accords.
http://seekingalpha.com/article/7014...japanese-banks
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Governments don't value money: they can create it when they want and they do create it when they want. They don't have any valuation of how debt affects their citizens or anyone else for that matter because they don't have to feel the effects themselves since they can just get money whenever they want through their cozy relationship with the central banks.
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Actually such risk is the reason why quite many countries have prescribed in their constitution independence of central banks. (effectively just one more branch like ex. judiciary) Regardless of any friendships, the main limitation is risk of inflation increase. Does
any first world country has elevated inflation now - let's say two digit inflation? (for argument sake you might count mine as first world ;) ) If not - it seems that you somewhat overestimate practical use of that limitless money creation possibility.
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