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Banks are manufacturers of money

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            • Most of the money in our economy is created by banks, in the form of bank deposits - the numbers that appear in your account. Banks create new money whenever they make loans. 97% of the money in the economy today is created by banks, whilst just 3% is created by the government.
              This short video explains:

              The money that banks create isn’t the paper money that bears the logo of the government-owned Bank of England.

              It’s the electronic deposit money that flashes up on the screen when you check your balance at an ATM.
              Contrary to popular belief, money creation in a modern economy does not directly involve the manufacturing of new physical money, such as paper currency or metal coins. Instead, when the central bank expands the money supply through open market operations (e.g., by purchasing government bonds or commercial bank assets), it credits the accounts that the government or commercial banks hold at the central bank. Governments or commercial banks may draw on these accounts to withdraw physical money from the central bank. Commercial banks may also return soiled or spoiled currency to the central bank in exchange for new currency.

              Right now, this money (bank deposits) makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of cash that you can touch.

              Banks can create money through the accounting they use when they make loans.

              The numbers that you see when you check your account balance are just accounting entries in the banks’ computers.
              In the re-lending model, this is alternatively calculated as a geometric series under repeated lending of a geometrically decreasing quantity of money: reserves lead loans. In endogenous money models, loans lead reserves, and it is not interpreted as a geometric series. In practice, because banks often have access to lines of credit, and the money market, and can use day time loans from central banks, there is often no requirement for a pre-existing deposit for the bank to create a loan and have it paid to another bank.

              These numbers are a ‘liability’ or IOU from your bank to you. But by using your debit card or internet banking, you can spend these IOUs as though they were the same as £10 notes. By creating these electronic IOUs, banks can effectively create a substitute for money.
              Central banks monitor the amount of money in the economy by measuring monetary aggregates such as M2. The effect of monetary policy on the money supply is indicated by comparing these measurements on various dates. For example, in the United States, money supply measured as M2 grew from $6.407 trillion in January 2005, to $8.319 trillion in January 2009.

              In the video below Professor Dirk Bezemer at the University of Groningen and Michael Kumhof, an IMF Economist explain where money comes from in less than 2 minutes:

              Every new loan that a bank makes creates new money.

              Money creation (also known as credit creation) is the process by which the money supply of a country or a monetary region is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or by detractors "printing money") by purchasing financial assets or lending money to financial institutions.

              While this is often hard to believe at first, it’s common knowledge to the people that manage the banking system. In March 2014, the Bank of England release a report called “Money Creation in the Modern Economy”, where they stated that:

              “Commercial [i.e. high-street] banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes.

              The most common mechanism used to measure this increase in the money supply is typically called the money multiplier. It calculates the maximum amount of money that an initial deposit can be expanded to with a given reserve ratio - such a factor is called a multiplier. It is the maximum amount of money commercial banks can legally create for a given quantity of reserves.

              Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created.

              Sir Mervyn King, the Governor of the Bank of England from 2003-2013, recently explained this point to a conference of businesspeople:

              “When banks extend loans to their customers, they create money by crediting their customers’ accounts.”

              Sir Mervyn King, Governor of the Bank of England 2003-2013

              And Martin Wolf, who was a member of the Independent Commission on Banking, put it bluntly, saying in the Financial Times that: “the essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending”.

              Monetary policy regulates a country's money supply, the amount of broad currency in circulation. Almost all modern nations have central banks such as the United States Federal Reserve System, the European Central Bank (ECB), and the People's Bank of China for conducting monetary policy. Charged with the smooth functioning of the money supply and financial markets, these institutions are generally independent of the government executive.

              By creating money in this way, banks have increased the amount of money in the economy by an average of 11.5% a year over the last 40 years. This has pushed up the prices of houses and priced out an entire generation.

              Quantitative easing (QE) involves the creation of a significant amount of new base money by a central bank by the buying of assets that it usually does not buy. Usually, a central bank will conduct open market operations by buying short-term government bonds or foreign currency. However, during a financial crisis, the central bank may buy other types of financial assets as well. The central bank may buy long-term government bonds, company bonds, asset-backed securities, stocks, or even extend commercial loans. The intent is to stimulate the economy by increasing liquidity and promoting bank lending, even when interest rates cannot be pushed any lower.

              Of course, the flip-side to this creation of money is that with every new loan comes a new debt. This is the source of our mountain of personal debt: not borrowing from someone else’s life savings, but money that was created out of nothing by banks.

              In principle, central banks can create money de novo in order to finance public spending. This concept is known somewhat misleadingly as debt monetization.

              Eventually the debt burden became too high, resulting in the wave of defaults that triggered the financial crisis.

              The laws that make it illegal for you to print your own £5 or £10 notes have been in place since 1844.

              If banks accumulate excess reserves, as occurred in such financial crises as the Great Depression and the Financial crisis of 2007-2008 - in the United States since October 2008, the relationship between base money and broad money breaks down, and central bank money creation may not result in commercial bank money creation, instead remaining as unlent (excess) reserves. However, the central bank may shrink commercial bank money by shrinking central bank money, since reserves are required - thus fractional-reserve money creation is likened to a string, since the central bank can always pull money out by restricting central bank money, hence reserves, but cannot always push money out by expanding central bank money, since this may result in excess reserves, a situation referred to as "pushing on a string".

              But these laws have never been updated to account for the fact that 97% of money is now digital.

              From the time when the Bank of England was formed in 1694, it took over 300 years for banks to create the first trillion pounds.

              The primary tool of monetary policy is open market operations: the central bank buys and sells financial assets such as treasury bills, government bonds, or foreign currencies from private parties. Purchases of these assets result in currency entering market circulation, while sales of these assets remove currency. Usually, open market operations are designed to target a specific short-term interest rate. For example, the U.S. Federal Reserve may target the federal funds rate, the rate at which member banks lend to one another overnight. In other instances, they might instead target a specific exchange rate relative to some foreign currency, the price of gold, or indices such as the consumer price index.

              It took them only 8 years to create the second trillion.

              The Technical Details

              Video Course: Banking 101

              This free animated video course (total 57 minutes) explains how the modern banking system creates money, and what limits how much money banks can create.

              Advanced: All the technical details

              This section covers all the nitty-gritty details of money creation by banks. We cover the three types of money, how balance sheets work, how central and commercial banks create - and destroy - money and what is wrong about the textbooks taught in universities.

              In contemporary monetary systems, most money in circulation exists not as cash or coins created by the central bank, but as bank deposits. Commercial bank lending expands the amount of bank deposits. Through fractional reserve banking, the modern banking system expands the money supply of a country beyond the amount initially created by the central bank, creating most of the broad money in the system.

              Read more…


              “Refreshing and clear. The way monetary economics and banking is taught in many - maybe most - universities is very misleading and this book helps people explain how the mechanics of the system work.

              Quantitative easing increases reserves in the banking system (i.e., deposits of commercial banks at the central bank), giving depository institutions the ability to make new loans. Quantitative easing is usually used when lowering the discount rate is no longer effective because interest rates are already close to or at zero. In such a case, normal monetary policy cannot further lower interest rates, and the economy is in a liquidity trap.

              - Professor David Miles, Monetary Policy Committee, Bank of England

              Why our monetary system is broken, and how to fix it.

              “Money is a social invention, indeed among the most important of all social inventions. At present the right to create money has been handed over to the private businesses we call banks.

              Other monetary policy tools to expand the money supply include decreasing interest rates by fiat; increasing the monetary base; and decreasing reserve requirements. Some other means are: discount window lending; moral suasion (cajoling the behavior of certain market players); and "open mouth operations" (publicly asserting future monetary policy). The conduct and effects of monetary policy and the regulation of the banking system are of central concern to monetary economics.

              But this is not the only way we could create money and, as recent experience suggests, it may be far from the best one. Read this book with an open mind and you will understand why.”

              - Martin Wolf, Chief Economics Commentator, Financial Times

              Further Resources

              Papers and videos from:

              • The Bank of England
              • The International Monetary Fund
              • Lord Adair Turner, former chairman of the UK’s Financial Services Authority
              • Other professors and experts in the monetary system

              Find out more

              Stay in touch

              • Islam Hussen Pakhtoon

                I am the one teaching people that the way to destroy a society is to copy its wealth over and over again and amazingly britain is copying wealth but not the wealth of it enemies or so called enemies who I believe are not really enemies but innocent people, but are copying its own wealth.

              Britain is destroying itself, very strange for a country thats meant to full of people of intelligence. How hilarious a country that is destroying itself. Goes back to Islam, there is is no benifit in interest based transactions. This article is really hillarious I might store this for later references when I feel depressed.
              In the Eurozone for example, article 123 of the Lisbon Treaty explicitly prohibits the European Central Bank from financing public institutions.

              • Makanda62958

                Christianity used to prohibit interest, Jesus turned over the tables of the usurers in the temple. Islam could just as easily become corrupted after the wars against you conclude.

              Laughing because we cannot cry.

              • Wocca

                Fear not, Islam does charge interest, it’s just couched in other terms.

              A home buyer in the UK will pay roughly the same for his loan whether he uses an Islamic bank or a Christian Bank.

              It may well go back to Islam but the fact remains that there is no Islamic country that creates the wealth that the world’s interest based transactions countries have. The wealthy Islamic countries that do exist are only wealthy because they sell oil to the countries that have interest based transactions.

              • Freeflight

                At least oil wealth is based on a real and tangible good, something you can touch and actually use.

              “Western wealth” on the other hand, slowly seems end up being just a big scam. Most of it based on fiat money and cooking the books, with no real economic gain or worth behind it.

        • Are You Kidding Me?

          Good grief.

          In modern economies, relatively little of the supply of broad money is in physical currency. For example, in December 2010 in the United States, of the $8.853 trillion in broad money supply (M2), only about 10% (or $915.7 billion) consisted of physical coins and paper money. The manufacturing of new physical money is usually the responsibility of the central bank, or sometimes, the government's treasury.

          This is basic economics 101. There are no first year college economic students who dont understand that the banking system creates money through lending. And the central banks control the multiplier via the reserve rate. This is normal banking business and has been so for centuries. It isnt nefarious… it’s just good common sense. Duh.

          • Mira Tekelova

            The problem is:

            1) the ‘money multiplier’ is an inaccurate and outdated way of describing how the banking system works. Please see our video: “What’s wrong with the money multiplier model”.

            2) the type of reserve ratio that’s discussed in the textbooks has never even existed in the UK

            3) the central banks have actually very little control over the money supply.

            Please see:

            Well, it is nefarious because the excessive lending caused hiccuups and the bankers were not squeezed out and the federal govt had to step in. And we did not audit the Fed.

          • Malc Cowle

            They make the money - but working people, along with Mother Nature, create the wealth - including THEIR capital - i..e., the means of production. And if anybody can prove me wrong I will show my bare backside in Primart’s front window in Market Street, Manchester. It IS basic economics - time for you to read William Petty, the man Adam Smith plagiarised.

        • sharif

          Thanks.but I want to know more about that.any reference for this? Please
          Share this….

        • Paddy

          See old problems, what what is your solution proposition

          • Mira

            Our proposals:

            The original loan, when it is paid back, will no longer exist. The bank has to pay down the original loan with the money repaid to it by it’s customer.

            Not so sure about that. Doesn’t clarify that in the wiki article. The whole point is to create new money to counter act deflation.

            • Graham Hodgson

              The reason bank-created money has grown to 97% of the money supply is that banks create new deposits by creating new loans faster than borrowers destroy existing deposits by repaying existing loans.

              Almost all of the interest collected by banks is paid out again by the banks in the form of interest to depositors, salaries, dividends, bonuses and purchases of goods and services by banks.

            • Wackfuk

              So when a bank loan is repaid the money is effectively destroyed in the same way it is created when the loan was created. No? And central bank reels in the money supply by highering Interest rates which make loans less attractive to customers and so slowing down the amount of new money a bank can create.


              The expansion of $100 through fractional-reserve lending under the re-lending model of money creation, at varying rates. Each curve approaches a limit. This limit is the value that the money multiplier calculates. Note that the top amount resulting in $1000 is not 20% but 10% as 100/0.1=1000.

            • Steve Beckle

              Wackfuk — You are correct. I’m currently reading “The Creature From Jekyll Island”. How the U.S. Federal Reserve system was created. The author does a super job of describing how money is created via issuance of debt, since it’s fiat money with no gold backing. According to the author, if all debt (money that was created out of thin air) were paid back, there would be no money in circulation. Think about that…all money is debt in a fiat money system!! Debt issuance creates money. Debt retirement destroys (fiat) money. And the real crime is that the bank, which did nothing to produce the money it loans out, collects interest on it. They’re not lending out their own assets (cattle, cars, tools, gold). They simply play an accounting trick, create money out of thin air, and presto, the interest starts rolling in. Then, with fractional banking, they’re allowed to lend out 90% of that money elsewhere, and the ponzi scheme continues. Fascinating and eye opening. If I print money I get arrested for counterfeiting. Banks do it all the time and it’s legal.

            • michaelnola

              Actually, counterfeiters are less criminal than banks, because they don’t make any money off interest, as do the banks and they have to at least invest in ink, paper etc.

            • Carole Hubbard

              I’m not quite following this. If the bank lends out money, it goes into debt to lend that money, it takes a risk and for that risk it gets interest. If you default on the loan, the bank gets into debt and must make up the debt by interest it earns on other loans — right?

            • Carole Hubbard

              Are banks really responsible for pushing up the price of housing? The market determines the price of housing, so if there is a shortfall in housing, it pushes up the price. So you could say that the high price of housing is due to insufficient available housing.

            • JoeD

              You’re looking at one side, Carole. One could also say that a high demand for housing is what pushed up the prices, and that would be more accurate.

            • Sterling Michaels

              Everyone is missing the point that it is the “Central Banks” that created debt by issuing the loan to the LOCAL Banks when the Local Banks’ Customers borrow, as a renovations often, in which the bank issues a loan which bank must have one twelfth of the loan in deposits (Your money and mine mostly)total long in their account (in the US) but since 1968 under the Bretton Woods Agreement, ( thanks to the Bank of England forcing the United States to either go off the gold standard or repay its debt to them, which would have bankrupted our country) the Federal Reserve does Not have any assets of THEIR ASSETS backing up this loan, and therefore it is you and I are repaying these loans without assets that the bank has to backup this debt and issuance of currency, that increases the net worth of the central banks like the Federal Reserve to ultimately of the money paid back to them, thus ensuring THEIR balance sheets that will ever increase and while the bank that loan see the money for sale your house is the title holder, ultimately it is the central bank that owns all of the assets of all of the banks, are assets of the Federal Reserve comment because if the default locally the feds take over the bank and its assets, and then sell it off to another bank to keep the illusion that they don’t really own those assets.

            • Geoffrey Bastin

              No. The bank didn’t have the money in the first place but only created it as a loan. Then the poor borrower becomes a slave to the system and pays the money lender interest for umpteen years whilst the lender laughs all the way to the bank.

            • Sterling Michaels

              Absolutely true!

      • Freeflight

        The bank will keep the credit and the interest, that’s also the most fundamental flaw of the system.

        97% of money is sitting around generating “new money” in the form of interest. But this “new money” isn’t really worth anything, after all no real economical worth has been created trough this interest. Nobody did build anything, nobody invented anything, but this money still needs something to “cover” it or else inflation will make it worthless.

        In the end, the rest of us (those that actually live of the 3% money that’s circulating real economies) have to earn less, work harder and spent even more so these insane amounts of money gonna keep their actual buying power.

        Because high finance and speculators do not invest their 97% of fake money into real economies. These 97% of money are not used to buy goods and pay services, these 97% are only sitting on bank accounts, generating new interest.

        The real economies are missing this money in the form of buying power, yet they are responsible for “keeping up” so the whole system doesn’t break together under it’s own weight.

        Monetary financing used to be standard monetary policy in many countries including Canada or France. Under the influence of Monetarism, monetary financing has been gradually prohibited by law in many countries, under the rationale that monetary financing is always inflationary.

      • mo

        Imagine a bank loans 10 people $1 and charges all of them 10% interest. All of them need to pay back $1.10. Where does the extra dollar come from?

        • Wackfuk

          The peoples pocket.

        • Ross Lewis Flynn

          from another loan with more interest, and then agian and again and again. thats why there is alway more debt than money.

        • some10

          The interest portion does not exist in the economy. That is why when borrowing (new money creation) stops, deflation starts. The money to pay the interest can only exist if they find borrowers to make new loans, at exponentially increasing speed. It is a system that is destined to crash. Check out kondratieffwavecycle .com to understand deflation that is built into the system just like inflation is.

        • JoeD

          If the bank held all the money then this might make sense. But since it doesn’t that extra dollar came from the people having jobs that paid them money, or investments they made.

    • Robert

      This is very misleading!
      Yes banks can credit the borrower’s account, which on the surface will increase the bank’s balance sheet but as soon as the borrower spend that money eg by a cheque to another bank, the bank will have to transfer an amount from their reserves to the other bank. There is no creation of money here its just an accounting entry.
      Even if the money stays in the same bank then the accounting entry will be to debit the borrowers bank account and then credit the beneficiary’s account. There is no new money here.
      Banks lending is limited to the amount of their reserves - reserve accounts or vault cash

      • Carl

        I agree this website is nothing more than propaganda. Base money can only be created by central banks

        • Robert

          banks can only ‘create money’ if they have reserves ie deposits from customers/wholesale markets.
          the way it is portrayed in this piece is that banks can create money regardless.
          As soon as the customer makes a payment from their account with borrowed money, the bank will need to transfer their reserve account money to the beneficiary’s bank.

          • Graham Hodgson

            This is a very narrow view of money and is not how banking works. It has long been known that the amount of reserves in existence has no bearing on economic activity. That is why all monetary authorities use some aggregate of the balance of customers’ deposits as their preferred measure of money. Banks create deposits when they lend to customers. This increases the measure of money. Those newly created deposits pass to other banks when the loans are spent. In the case of the vast majority of transactions, reserves are transferred only periodically and only after all deposit transfers for that period have been completed and net balances established. Reserves are just the accounting tokens used to keep all banks’ balance sheets in balance at period-end. But precisely because reserves don’t accompany payment, banks have to constantly scramble to borrow and rent out from the limited stock of reserves to meet their end-period settlement obligations and this is the destabilising mechanism which makes bank bailouts mandatory when it falters.

          • Frank

            Banks can ‘create money’ by leveraging ‘reserves’. If you put €10 in a bank the bank can then ‘create’ or lend to someone else +€100.. this gets out of hand very quickly and that’s where the problem lies. Banks are in it for the profit just like a lot of individuals are. A committee as these people propose, would (ideally) look after the greater good of everyone/the system.

    • Can

      I do wonder how international payment systems work. Say, US imports goods from China and pays for them with USD. What happens if Bank of China intervenes? What happens if it does not? Can you help me go through this transaction through use of balance sheets of economic agents?(Importer, Exporter, Chinese bank, US bank, FED, Bank of China) What happens to bank reserves in US? Thank you?

    • regnaD kicN

      Don’t forget “fractional Interest.” By law, banks can lend up to 10 times their worth. If the loan isn’t repaid, the banks still have next to nothing to worry about as the other many fractional interest loans will make up for the shortfall (and also being able to write off the debt) not to mention being bailed out by the federal government if things really get bad, like in the 1986 S&L crisis or the 2008 financial meltdown. It’s a win-win situation for the banks, but for the average citizen it’s a lose-lose situation due to interest and inflation eating up their paycheck’s value.

    • Rubicon

      This is a bit naive and not actually true in some areas. Central banks are not owned by the governments, they are in effect privately owned banks which loan money, created out of nothing, to the government at interest. A large proportion of your income tax goes to pay the interest on the national debt (money borrowed from the central banks) and hence into hands of those who control the central banks. All western nations and most of the world is in this system, this book is a good explanation of this system. High street banks do indeed create further money out of nothing at interest (10x bank deposits), but this goes further. These loans, once paid into another bank after purchase something with this money, allows the receiving bank to again lend 10x on the original loan and so on massively increasing debt levels. The money for interest payments is however never created, so the only way the system can survive is by creating more and more debt to pay the interest. In a recession, there is less money created (new loans) for interest payments, therefore re-possessions and defaults ( bankruptcies ) increase dramatically and the banks take control of real assets, with money created out of nothing. This all carries on until the inevitable collapse of the system. This is just a brief summary.

    • n k prasad

      I am agreeing that money from banks by online, Debit & Credit cards are true money The black/fake currency will be controlled which is weakening the national money including the hard work of loyal citizens. Every moralized citizen has to fight against the financial Terrorism.

    • Nick Hoggard

      Is an IOU for £1 really worth the same as a £1 note?

    • radovas

      i see such difference of opinions and such knowledge in here, that it would be wonderful, if your beautiful minds, should work toward the essence of the problem…to have a biggest percentage of “production” capital and lower one on “investment” capital…to make money more real, more valuable, more accurate…more productive…that is the bottom line….

    • Sky Wanderer

      Parts of a recent publication by the Bank of England:

      “Of the two types of broad money, bank deposits make up the vast majority — 97% of the amount currently in circulation.

      And in the modern economy, those bank deposits are mostly created by commercial banks themselves.” (p15)

      Most of the money in circulation is created, not by the printing presses of the Bank of England, but by the commercial banks themselves: banks create money whenever they lend to someone in the economy or buy an asset from consumers.

      By definition, ‘buying’ assets from created, new money is theft.

    • Ben

      In the Original paper, The third bullet point at the top of page 1 says…

      The amount of money created in the economy ultimately depends on the monetary policy of the central bank.

      How strongly can this be disputed and what are the chances of convincing the BoE to stop using such language assuming it can be shown to be false

    • aleena rose

      The information you have given in the blog really marvelous and more interesting. Peter Martin

      The crunch issue for all banks is that they do have, from time to time, to back up the money they have created supposedly “out of thin air” with real government money. The mistake which I think many are making is to assume that bank created money, created when loans are issued, stays in the economy until that loan is repaid.

      It doesn’t.

      Suppose I borrow £1000 from my bank. The bank edits my account to show that extra money. So its just been created. “Out of thin air”! Fair enough. I then write out a cheque for £1000 to the taxman. The taxman puts the cheque through the clearing system but he doesn’t want bank money, bank IOUs, he wants real government money. The bank supplies this from its reserves. At the same time it edits my bank account downward so eliminating the newly created “money”. I still owe the bank £1000.

      This would be relatively unusual but possible. A more usual scenario would be that a bank would lend money to a business, say a builder, who would hire bricklayers, joiners, buy raw materials etc for his building project. Every transaction would attract the usual government taxes. Income tax. VAT, NI contributions, Corporation tax etc. As the newly created money is spent and respent it rapidly dwindles until there is nothing left. It has nearly all gone to the government’s taxman who doesn’t want the money as it was originally created. He insists that those banks convert their IOUs to government IOUs.

      • Carole Hubbard

        Instead of saying “the bank makes money out of thin air” when it creates a loan, why couldn’t you say that the bank forwards money on a person’s behalf and charges them interest for the service? The bank takes the risk on who it lends money to and if the lender defaults, the bank needs to make the money up from good loans that are repaid.

        • Carole Hubbard

          I’m not trying to justify or rationalise the banks’ behaviour, just trying to work it out. After all there are other things wrong with the system like speculation, money laundering, the Libor exchange rate — not just bank lending.

          • JoeD

            There is nothing wrong with speculation. Stop listening to Bill O’Reily.

   Peter Martin

            Carole, Yes you’re right. The bank does need to make up bad loans from the proceeds of good loans. It needs to pay its staff and run its premises etc. It can’t just “create money from thin air” to do that.

            The bank isn’t doing anything different than a casino does when it issues chips. Except bank money is digital. Those chips could function as money outside of the casino too providing that everyone had confidence the casino was going to not default on its obligations.

            So is positive money going to stop casinos issuing chips too? Are we going to see stacks of real government coins on the blackjack tables instead?

            If not, why not? The casinos are creating money too, if not from “thin air” then just bits of plastic! They obviously need to be stopped if Positive Money has its theory right

            • Carole Hubbard

              The difference between a bank and a casino, is that a person borrows from a bank and knows beforehand what the risks are, with a casino its just pure luck. I can’t see why a bank can be compared to a casino which is gambling, whereas a bank provides finance.

              • Peter Martin


                You’re missing the point here, which is that the casino creates its own “money”.

            • That would be still be true even if you didn’t go anywhere near the roulette tables but instead spent the chips in the casino restaurant.

          • Carole Hubbard

            Sorry, I don’t follow. People need to use money or “money” to pay for things. Why is this evil, and what is the alternative?

          • JoeD

            Where did Peter say this was evil?

            “Banks are supposedly the problem with society, but how?”

            No, they’re not. The government regulation of banking is the problem.

            “And what about all the other things such as speculation where a person merely trades on the highs and lows that naturally occur in economic cycles, what about the stock exchange where corporations keep their stock prices high through outsourcing all their expenses to the public, cost cutting without adding value. ”

            It would do you well to look into the reason for speculators. And how do companies outsource their expenses to the public?

            “What about the jobs that don’t do anything for society such as accountants, which people only need because the system is so complicated? ”

            People would still need accountants if the system wasn’t so screwed up.

            “What about the way electrical gear has built-in obsolescence, and what about cartels that set prices artifically based on what they can get rather than what their products are worth? ”

            Built in obsolescence is a myth. I would LOVE for you to point to one thing to prove this point. I’m always amazed by people’s belief in this cockamamie idea. I mean, ok, on the surface it seems feasible. But that’s for people who can’t think past step one. So business A produces a product that lasts one year. It doesn’t take a genius to realize that business B would then produce a product that lasts two years to out compete business A. And on and on. It’s absurd. Of course the biggest reason this myth persists is because the average person cannot conceive of the concept of economic trade-offs. Sure, you can have an electronic item that last twice as long, but it will also cost twice as much, may be twice as heavy, etc. etc. Plus, especially with electronics, people are constantly getting the newest, latest thing. Does it make sense to make DVD players that last 100 years when the entire concept of DVD’s will be gone fairly soon? Should you spend another $200 on an iPhone that will last slightly longer when more than likely you will be upgrading to a better version in a couple of years? I still have one of the old, original iPods. And guess what, it still works. Obsolescence my ass.

            Please, go ahead and name these cartels that set their prices higher than what the market dictates. Oh, you can’t? I’m so surprised.

          • Carole Hubbard

            Money is a form of barter. You could use pigs, bags of wheat, your time and skills, or money which everybody can use to barter with regardless of their situation. Some people might not need pigs, bags of wheat or a particular skill. Money is a convenient form of barter. To try and put casinos in the same category as banks due to the fact they “make their own money” is like saying rabbits are dangerous because they eat food and so do tigers. It doesn’t necessary follow.

        • JoeD

          But when a casino issues chips it has actual paper money to back them up. This would be more akin to 100% reserve banking.

  • Daniel Norman

    I was telling the guys at work about this and someone asked me the following question which I simply couldn’t answer, “If the banks genuinely create money out of thin air, why was the financial crisis caused by people defaulting on their debts? If the money was simply created from nothing, the bank would have no dependency on it and failure to repay the principal would have no impact.” Can anyone give a plain English answer to this for me?

    • Jim75

      When a bank (bank A) grants a loan it expands its balance sheet by increasing its assets (The signed loan document) and liabilities (the new deposit account, merely a book keeping entry in the real world) by an equal amount. If the customer draws down the loan by spending the amount of the loan with a trader with an account at another bank (bank B) the following would happen if this was the one and only transaction in the whole banking system that day. Bank A no longer has the liability of the origional loan but retains the loan document (asset). Bank B now has the additional liability of the new deposit in the traders account. To complete the transaction bank A must transfer the amount of the loan from its reserve account at the central bank to the reserve account of bank B. On bank A’s balance sheet which has contracted the loan document takes the place of the reserves it transfered to bank B. Bank B’s balance sheet has expanded by an increase in its reserve balance (asset) and its matching new deposit liability.

      When the customer repays the loan to bank A the loan document (asset) ceases to have any value and is replaced on the banks balance sheet by the resuling increase in its reserve balance (asset).

      If the customer fails to repay the loan resulting it being written off then the loan document no longer has any value but the bank never gets to replace the reserves it lost at he begining. This has to be coverd from the banks capital resulting in a real loss to the bank.

    • some10

      When you buy a home for a million bucks, bank creates 1 million dollars and puts it in your account. You write a check and buy the whole. The IOU transfers to home sellers from the buyer’s account. Now the bank owes 1 million dollars to the home seller who cashed your check. You promised to pay back3 million dollars (with interest) over the next 30 years. When you default, bank keeps the home which is now 500K and the bank still owes 1 million to the home seller. The bank is secrewed. FED comes to rescue and buys the home for a million dollars from the bank.

    • Laxon Kamau

      Automobiles+electricity+petrochemicals+cosmetics+air travel+sea shipping+diesel locomotives+construction machinery=crude oil.
      With a global shortage of oil, it does not matter how much trillions you got in your account. Oil is the key driver of the entire money market.

    • Shanghaiboy

      In plain English, why sub prime mortgages in the US caused a financial meltdown. When those guys got the mortgage from the bank, the bank simply created the money electronically in their system. Now the mortgage companies had deals with the banks, they would not receive cash, instead the bank would package that date as new capital that they pushed to hedge fund investors for investments in various parts of the world. Now what the hedge fund managers receive is also electronic money from the banks…which is basically those mortgage debts plus the expected interest. The hedge fund investors take that money(debt) and use it to invest in various properties, projects etc…they too hand it out as electronic cash and its to generate profit too mark you. u see the chain…a default happens, the bank has no liquidity and can’t balance their book and a chain reaction is triggered. This is as simple as I can lol.

  • Jasmin Alduk


    Why not turn your $10 into thousands literally? Through the securist and most efficient payment method paypal!

    Where did you spend your $10 today, yesterday, the other day and the day before that? Did you spend it on burgers from a fastfood chain? Did you buy something that later on you’ll just throw in the corner? Did you buy a music cd that you’ll only end up listening to just one song?

    Did you just purchase a new DVD movie? A new dress perhaps and it’ll just end up in the closet not being able to wear on any occasion? Did it make you any money at all?

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    $$$ REQUIREMENTS: You must have a verified paypal account (premiere or business account to be able to accept payments). If you do not have an account you can go to and follow the instructions to set up a free account. In order to place the initial $10 into your account, you will have to verify your bank account with paypal (which may take a few days). Paypal is 100% secure and is used by millions of people world wide.
    FPRIVATE “TYPE=PICT;ALT=Sign up for PayPal and start accepting credit card payments instantly.”

    STEP 1: Send, through paypal, $1.00 to each email on the below list. Make the subject of the payment “Email List” and in the comments, write “PLEASE PUT ME ON YOUR EMAIL LIST.” What you are doing is creating a service by this and best of all you are not giving your address to anyone you do not know … THIS IS ABSOLUTELY LEGAL! The email list:

    STEP 2: Now take the #1 email off the list that you see above, move the other addresses up (10 becomes 9, 9 becomes 8, 8 becomes 7, 7 becomes 6 etc) and add YOUR email address (the one used on the paypal account) as number 10 on the list.

    STEP 3: Change anything you need to, but try to keep this article as close to original as possible. Now, post your amended article to at least 200 newsgroups, message board. (We think there are close to 32,000 groups) All you need is 200, but remember, the more you post, the more money you make - as well as everyone else on the list!


    Step #1) You do not need to re-type this entire letter to do your own posting. Simply put your

    CURSOR at the beginning of this letter and drag your CURSOR to the bottom of this document, and select ‘copy’ from the edit menu. This will copy the entire letter into the computer memory.

    Step #2) Open a blank ‘notepad’ file and place your cursor at the top of the blank page. From the ‘edit’ menu select ‘paste’. This will paste a copy of the letter into notepad so that you can add your name to the list.

    Step #3) save your new notepad file as a .txt file. If you want to do your postings in different sittings, you’ll always have this file to go back to.

    Step #4) Use Netscape or Internet Explorer and try searching for various newsgroups, on-line forums, message boards, bulletin boards, chat sites, discussions, discussion groups, online communities, etc. For example: you log on to any search engine like,,, then you search with subject like ?millionaire message board? or ?

    money making message board? or ?employment message board? or ?money making discussions? or ?

    money making forum? or ?business message board? etc. You will find thousands & thousands of message boards. Click them one by one then you will find the option to post a new message.

    Step #5) Visit these message boards and post this article as a new message by highlighting the text of this letter and selecting paste from the Edit menu. Fill in the Subject, this will be the header that everyone sees as they scroll thru the list of postings in a particular group, click the post message button. You’re done with your first one! Congratulations? THAT’S IT!!

    All you have to do is jump to different newsgroups and post away, after you get the hang of it, it will take about 30 seconds for each newsgroup!


    MAKE!! BUT YOU HAVE TO POST A MINIMUM OF 200** That’s it! You will begin receiving money within days! $$$$


    Now the WHY part: Out of 200 postings, say we receive only 5 replies (a very low example). So then we Made $5.00 with my name at #10 on the letter. Now, each of the 5 persons who just sent me $1.00 make the MINIMUM 200 postings, each with my name at #9 and only 5 persons respond to each of the original 5, that is another $25.00 for me, now those 25 each make 200 MINIMUM posts with my name at #8 and only 5 replies each, I will bring in an additional $125.00! Now, those 125 persons turn around and post the MINIMUM 200 with my name at #7 and only receive 5 replies each, I will make an additional $625.00! OK, now here is the fun part, each of those 625 persons post a MINIMUM 200 letters with my name at #6 and they only receive 5 replies that just made me $3,125.00!!! Those 3,125 persons will all deliver this message to 200 newsgroups with my name at #5 and if still 5 persons per 200 newsgroups react I will receive $15,625.00! With an original investment of only $10.00! AMAZING!! $$$$

    $$$$ When your name is no longer on the list, you just take latest posting in the newsgroups, and send out another $10.00 to names on the list, putting your name at number 10 again. And start posting again. The thing to remember is, do you realize that thousands of people all over the world are joining the internet and reading these articles everyday, JUST LIKE YOU are now!!

    So can you afford $10?? And see if it really works?? We think so? People have said, what if the plan is played out and no one sends you the money? So what are the chances of that happening when there are tons of new honest users and new honest people who are joining the internet and newsgroups everyday and are willing to give it a try? Estimates are at 20,000 to 50,000 new users, every day, with thousands of those joining the actual Internet.

    Remember, play FAIRLY and HONESTLY and this will work. Seriously, most people think this is a scam, but you actually do get thousands of dollars out of it, it is NOT another crazy stupid scam, if people follow through with sending out $10, it works!!!!!

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    $$$$$(ps just incase turn on spam filter on your email adress, if you get posted offers from third partys,) and thats it . simple.
    ps,ps. If some of the emails on the list dont receive payments or work.Just send to the few that work and youv spent even less.!! easy!
    Hope you enjoy.

    Thank you for using PayPal! Sincerely, PayPal Community .

  • Robert Walker

    This article speaks very briefly. They get money from customers in form of deposits at low interest rate. Then they lend the money to the needy at higher rate of interest. The margin is their profit. Watch a free webinar on how to make 10K a month without lifting a finger at

  • Anon Ymous

    Banks don’t create money because they don’t have the power to create money, that power is reserved for a citizen. Only YOU have the power to create money, and the banks know this.

    • Greenbacker84

      There my friend the total ignorance and evasion of so called ‘Positive Money’ is laid out for all to see. So long as they evade the fact we the people issue money via our promissory obligations and the catastrophic impact of banker imposed usury on the money supply they cannot be taken seriously. australia4mpe

  • Anon Ymous

    Everytime you take out a loan you’re giving the bank a license to create money that’s why the system needs you to sustain itself…

  • Parminder Singh

    Do all banks create money through this or just in few countries? Like I am from India but whichever documentary i watch it talks about banks in america or england. So do Indian banks also create money out of debt?

    • Greenbacker84

      All banks launder our promissory contracts in pretended loans, no exceptions. Research Mathematically Perfected Economy.. australia4mpe.

  • 0000451111

    Banks create money upon deposits, by using fractional reserves, if a bank buys a government bond on say a thirty day account, it has a deposit that it multiplies using fractional reserves that “fraction” is the government bond, it can pay easily using FR, and will have more deposits to lend from the bond even locking up the original bond in a vault, all within one month. The money thus “created” will become loans to borrowers from the bank, creating more deposits upon which the bank collects interest, if the bank uses a fractional reserve of say ten it can loan out nine times that amount, it can then charge interest that often ends up at three times the original loan over 20 years, making the amount now thirty times the deposit example; 9×3 plus deposit=30.

    The original amount of any loan is cancelled out upon repayment, but the amount of interest earning loans has increased, it therefore matters little that the “created” amount is canceled out, the method does explain however that a bank can actually start with no money at all, such is the madness of banking, and our compliance to such a scam

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