Just got wise to this a few years ago. Still not sure I understand the mechanism totally. I wonder why nobody explains this to you in school? How would you answer this question? 95% of money in the US comes from: A) The US Mint prints it and distributes it to banks. B) The Federal Reserve creates it based on the US bond market. C) Private Banks create it out of thin air as a loan based on a pledge of repayment by the borrower. YouTube - Money As Debt (1 of 5) After watching this my understanding is that C is correct.
I only watched the first bit. But what seems missing from the initial explanation is the risk the banker takes in lending. When a bank loans money for a car, the bank owes the carmaker and owns the car. When a bank loans money on a house, the bank owes the builder/seller and owns the house. As we've witnessed recently. While there may not be physical assets backing up the loan, the risk is very real. Thanks for posting this - interesting topic.
I hear they have stuff growing on trees out there that is the next best thing.... Well, yes they get to charge interest on the loan. I'm not smart enough to figure out what the correct interest rate should be, really.....I'm just fascinated if that is in fact correct that the bank creates that money out of thin air....I didn't realize that was really allowed. I know the FED creates money at one level, and I know the FED is private but I thought somehow the banks themselves had to borrow it from the FED to be able to lend it.:huh:
I planted 2 of those money trees in my back yard about 8 years ago. So far I have spent about $3000 in fertilizer, tree food, insecticides, and water to keep them alive, but still no money. These things better start producing soon or they are gonna break me.:rofl:
