Fractional Reserve System
Did you know that banks do not have to have as much money in reserve as they are loaning out?
Before WW2, they only needed to have 10% of what they created in loans, in actual reserve cash.
E.g. If they had $100 in cash, they could create loans of up to $1000 and get interest on those loans, even though they don't own the money they lent out. They just collect the interest, and make a profit from nothing.
The debt they are owed becomes an 'asset' to the bank, and they write you a cheque or deposit electronic money in your account to the value of the loan.
Essentially, the money gets created out of thin air, and you pay them interest for money they didn't even own before you got the loan.
Now its even less than 10%
Read up on it:
http://www.basicincome.com/basic_banks.htm
Before WW2, they only needed to have 10% of what they created in loans, in actual reserve cash.
E.g. If they had $100 in cash, they could create loans of up to $1000 and get interest on those loans, even though they don't own the money they lent out. They just collect the interest, and make a profit from nothing.
The debt they are owed becomes an 'asset' to the bank, and they write you a cheque or deposit electronic money in your account to the value of the loan.
Essentially, the money gets created out of thin air, and you pay them interest for money they didn't even own before you got the loan.
Now its even less than 10%
Read up on it:
http://www.basicincome.com/basic_banks.htm