Where does money come from? This is one of the most important concepts in our society, and I have met very few people who can answer the question. At least 90% of our money is created out of thin air through bank loans. It isn’t handed out by the government or printed as cash. It is created at local banks through loans.
When you go into a bank to get a loan to buy a house, you fill out a bunch of paperwork, the bank checks your credit etc., you sign the mortgage, and the bank credits your account with the money. You then pay for the house. Many people think that when the bank credits your account with the money, the bank is transferring money from the bank’s pile of money into yours. This is not true.
Banks are subject to a reserve requirement imposed by the Federal Reserve. This reserve requirement was essentially eliminated by Allen Greenspan. This reserve requirement stipulates how much money can be loaned in relation to the banks assets which include cash and deposits held for the bank at Federal Reserve banks. What are the reserve requirements? According to a paper at the Federal Reserve Bank of New York’s Web Site, for 70% of banks they are zero.
What does this mean? This means that when you go into a bank and sign the promissory note (mortgage) for a $200,000 house, the bank can just credit your account with $200,000 without moving any money from anywhere. This is stated directly in a report by the Federal Reserve Bank of Chicago. The have literally created $200,000 with that transaction. In reality they have also created the need for much more money, since you need to pay interest on that $200,000. I’ll address the interest in the future. With this system in place, why do we need to give the banks what amounts to $2,200 for every human in this country?