" I read that banks lend out money by simply typing it into a computer and loaning it out. They do not lend the money belonging to other depositors. This money from nothing is to be paid back with interest though. Wow what a racket that is!
2006-12-01 05:29:26 · 10 answers · asked by swankoid 1 in Business & Finance ➔ Personal Finance
Banks are required to have a certain percentage of the money they lend on hand (maybe 30%? I am not sure of the number) - all the rest of the money they lend (the remaining 70%) is created on computers based upon expected earnings. So yes, banks do create money from nothing to lend - in a sense.
What's really interesting is that it is expressly stated in the American Constitution that the government is the only one who can make money - so it seems to me that this is entirely illegal, and yet it continues. When will America get a reset to fix stuff like this - and the out of control FDA for that matter.
Peace!
PS - It is not good for the economy - it is good for the banking industry and the people making money at the top of it. There is a book by Robert Heinlein that has an appendix that details exactly why it is not good for the economy and how it keeps most American businesses and people in debt. You may not care for the story, but the Appendix is hard to argue with.
2006-12-01 05:35:13 · answer #1 · answered by carole 7 · 1⤊ 0⤋
Yes they do. It is federal law that says they must have a set amount on hand for every dollar they lend out. Its been a while since I last looked at the statistics but I believe it is 20 to 1. You can loan out 20 dollars for every dollar you have on deposit. Don't quote me on that though, like I said it has been a while. Yes it is quite a racket. So what would it take for you to become your "own bank"? Hmmmmm. Gets you thinking doesn't it?
We see much the same thing happening in business. We take raw materials and add labor and some skill, and sell a finished product to some one at a price that is much higher than the cost of the parts and labor. Sort of like MAKING money. The bank creats wealth by writing loans, and a factory creats wealth by building something and charging more for it than the cost of parts and labor. Hmmmm now even more to think about.
2006-12-01 05:38:54 · answer #2 · answered by john d 3 · 0⤊ 0⤋
Banks may not directly do this, but the Federal Reserve Bank, which prints our US dollars, can create money, either through printing more, or by electronically creating it.
If the Fed gives the money to a bank to lend it out, then that results in the same "creating money from nothing" statement, of course.
And the fact that the Fed is a privately owned bank (owned by the banks, in effect, although they don't have to disclose this), then the result is the same.
So yes, banks can create as much money as they want by using their position as owners of the Federal Reserve Bank to literally create the money and give it right back to the bank that requested it, all without having to show or disclose that they created money from nothing.
Welcome to currency based on the faith of the US government.
ForeclosureFish
http://www.foreclosurefish.com/
2006-12-01 05:44:56 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Banks have the ability to "leverage" their cash reserves. They can't simply lend money they don't have, that's not entirely accurate.
They can, however, borrow money from the Federal Reserve, or other institutions, or Wall Street, and re-sell that money at a higher interest rate.
Banks make money by borrowing cheap, short-term money, then lending it at longer terms and higher rates. Typically, some of their "borrowed" money is your deposits. When you deposit money with a bank, you are effectively loaning them that money. They can take some factor of their deposits and lend that back out.
2006-12-01 05:52:57 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Banks will have a "fund" or a "reserve" that they can "lend out". They no longer move physical money around (which isn't actually money anyway, just promisory tokens representing money) and as such the money they loan doens not "belong" to depositors
2006-12-01 05:31:55 · answer #5 · answered by rchlbsxy2 5 · 0⤊ 0⤋
Money is loaned to banks by the federal government for a low rate. Banks take in our money thru checking, savings for personal gain inturn if you have a one percent intrest checking or savings you must know the bank must be getting 3 to 4 percent more on your money. The money that is loaned to us we are charge the intrest. And that intrest makes up what intrest the bank is paying on the loan to the government and on top a two or three percent rate hike for a profit. In other words, they rape our A-S-S-E-S!
2006-12-01 05:37:18 · answer #6 · answered by Anonymous · 0⤊ 0⤋
no they do use the money that they make to start these loans. banks make money from checking accounts, other loans and savings bonds.
2006-12-01 05:38:24 · answer #7 · answered by Ted 2 · 0⤊ 0⤋
banks, credit cards, businesses everyone is out to get you or your money =S
2006-12-01 05:32:30 · answer #8 · answered by JeWel in the MakE! 2 · 1⤊ 0⤋
yes they do
2006-12-01 05:30:50 · answer #9 · answered by Bob P 3 · 0⤊ 0⤋
i know, but its good for the economy
2006-12-01 05:30:59 · answer #10 · answered by epbr123 5 · 0⤊ 3⤋