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Banks are not only able to print money, but they’re actually encouraged by the government to do so
Banking is one of the least understood businesses throughout history, and yet, they are the very places that people dump their life savings into
So how does the business of banking work?
What’s the purpose of a bank?
It’s to have a safe convenient place to store our money
But bankers don’t open up a bank out of the kindness of their hearts to make our lives easier.
The purpose of a bank is to the make the owners money.
But unlike every other business model out there, banks are the only ones that are legally able to print money out of thin air.
Today, it’s a little different because the world doesn’t base it’s money on gold anymore
Fiat money - money that’s really nothing more than paper that the government says is money.
And it’s in this fiat money system that bankers have become the modern day alchemists with the ability to literally create money out of nothing.
You deposit $10,000 into your bank account
Banks are required by law to only keep around 10% of that $10,000 you deposited as “reserves”
Why would they just let your money sit there when it could be out collecting interest for them and making them money?
So they lent out 90% of your money, or $9,000 as a loan to Frank at a 5% interest rate
All of a sudden, Frank has $9,000 to spend, you still have your $10,000 and what started out as only $10,000 in the money supply has magically increased to $19,000
Before Frank spends it, the $9,000 loan he got goes directly into his bank account
Since the bank is there to make money and they only have to keep 10% of Frank’s money in reserves, they can now take 90% of that Frank’s $9,000 deposit & lend that out to other people
The Creature from Jekyll Island: A Second Look at the Federal Reserve: https://amzn.to/36FuMFP https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.marketwatch.com/investing/stock/jpm/financials https://www.nytimes.com/2008/05/11/business/worldbusiness/11iht-morg12.1.12762783.html https://money.cnn.com/news/specials/storysupplement/bankbailout/ https://www.washingtonpost.com/archive/politics/1980/04/29/third-largest-bailout-set-up-for-pa-bank/fe53f870-34ec-44bd-be2d-7043cefde2a1/ https://www.nytimes.com/2008/10/03/business/worldbusiness/03iht-bailout.4.16679355.html
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