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In effect, these are both instances of an institution taking a loan from an individual.

When you put your money into a bank, you are in essence loaning your money to the bank. They pay you interest on the money, and then they loan it out at a higher interest rate and keep the difference. Likewise, when you take out a bond you are in effect loaning your money to the government, which will pay you back with interest at a later time.

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Michael Scalise

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3y ago
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Q: In what way are bondholders and banks similar?
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