I’ll start this off with the caveat that I have a rather limited perspective on international finance and the minutia of things like currency trading and hedge funds, nor do I know any of the douchebags who regularly partake in these probably rather fun and exciting activities. I will tell you that I understand the following part of the system pretty well…and hopefully, you will too after you read this. Don’t worry – I’ll go kinda slow like.
All money comes from a bank. Maybe your local bank…maybe THE BANK…the Federal Reserve, where money sort of comes from. More on that in a minute – for now, just remember: all money comes from a bank. Banks don’t just give away money though, do they? They LOAN the money out. Even the big bank, the Federal Reserve, does this with our government. That’s not the half of it, though. You see, a bank can take in a nice round amount of cash (for argument’s sake) of 10 billion dollars. Now, we learned our lesson from the Great Depression…so the government makes a bank keep a certain amount of cash on hand in the event of a “run on the bank;” basically, a situation in which everyone withdraws their money at the same time for whatever reason. This is usually about 10% of the total cash they’ve taken it or loans they’ve promised. What about the other 90%? Well…that gets loaned right out to folks…with interest. And they deposit it (eventually) in a bank…and the whole shit starts all over again.
The simple truth? Banks create money out of nothing. And it’s a closed system…no new money is actually created. So…if no new money is created…where does the money to pay the interest on all of those loans come from?
Hmmm? HMMMMM? I thought so.
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