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[headcube]

I've just been thinking about Mr. Dogsolitude's post about Fractional Reserve Banking, which is the means by which banks create money out of nowhere.

The Wikipedia article on the subject shows how a small amount of actual money can be converted by banks into a large amount of Magical Bank Money, which is what we all live on

Comments

[headcube]

Precisely. And politicians here and in the US (and probably in much of the rest of the world) are increasingly playing on that misconception, with left, right and centre all competing with each other to cut the most taxes at a time when it could hardly be less appropriate. It's quite shocking really.

[dogsolitude_v2]

Yeah, it's weird isn't it? All that stuff we fight over sort of comes out of thin air...

I figured it would therefore be a bit pointles wondering where the $700bn would actually come from...

[dogsolitude_v2]

As an aside, it was finding out about this sort of thing that finally gave me the kick up the arse I needed to clear my credit cards and debts. I didn't see why my salary should be used to line the bank's pockets in interest!

I tend to see money these days as a sort of unit of my energy, which I generate whilst working. I'm therefore a lot more careful with it than I used to be :o)

Also, it's worth noting that the money that gets lent out, say in the form of mortgages, whilst being imaginary can be readily exchanged for something tangible (e.g. a house) should the debtor be unable to keep up repayments. Under these circumstances a bank will then get a house for nothing! Typical... :oD