The bank ik a place for people to store their money, and I have 15K on my account. The chance that I’ll need that in full is pretty low and like me are 99 other people.
What the bank does is give someone else part of that stored money as a loan. If someone else loans 30K, they get that money out of the banks reserves (made with the 100x15K). However, I still see 15K on my account, and not 14.7K. So essentially making money out of thin air.
This is also why bank runs are so dangerous to the bank, because if everyone start funneling out their savings eventually the bank doesn’t have enough money in stock to pay everyone causing them to fall.
The bank makes money on the mortgage through the interest rate, so while 30K was loaned, 40K has to be paid back.
The best part is the money does not exist they are literally lending it into existence. Click of a keyboard. Now you have debt, they have assets, the cost of housing goes up because everyone is doing the same thing
I know it sounds insane. And that’s because it is. Study it, mind will be blown I guarantee
Look for the movie Zeitgeist (free on YouTube) to understand how banks are able to lend money even if they don’t have it.
In a nutshell, they are able to lend multiple times the money they hold from depositing clients.
So for example. If a bank has $100m (clients deposits) they may be allowed, by law, to lend 10 times that amount… Even if they don’t have the money anywhere, the central bank in their country will facilitate that money to the bank. There is much more to this mechanic but this is the core of how the banks work all around the world.
I don’t quite understand. Doesn’t the bank have to pay someone for the house? So the money has to exist before they can lend it to you.
Iirc correctly mortgages work like this.
The bank ik a place for people to store their money, and I have 15K on my account. The chance that I’ll need that in full is pretty low and like me are 99 other people.
What the bank does is give someone else part of that stored money as a loan. If someone else loans 30K, they get that money out of the banks reserves (made with the 100x15K). However, I still see 15K on my account, and not 14.7K. So essentially making money out of thin air.
This is also why bank runs are so dangerous to the bank, because if everyone start funneling out their savings eventually the bank doesn’t have enough money in stock to pay everyone causing them to fall.
The bank makes money on the mortgage through the interest rate, so while 30K was loaned, 40K has to be paid back.
Also please correct me if I’m wrong.
The best part is the money does not exist they are literally lending it into existence. Click of a keyboard. Now you have debt, they have assets, the cost of housing goes up because everyone is doing the same thing
I know it sounds insane. And that’s because it is. Study it, mind will be blown I guarantee
Look for the movie Zeitgeist (free on YouTube) to understand how banks are able to lend money even if they don’t have it.
In a nutshell, they are able to lend multiple times the money they hold from depositing clients.
So for example. If a bank has $100m (clients deposits) they may be allowed, by law, to lend 10 times that amount… Even if they don’t have the money anywhere, the central bank in their country will facilitate that money to the bank. There is much more to this mechanic but this is the core of how the banks work all around the world.
You’re describing “Fractional Reserve Banking” if anyone wants to look it up.
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Those money are numbers on computers. I guess this is what OC referred to as making money out of thin air.
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