How Banks Perform Money Creation
Executive Summary
- Banks create money out of thin air.
- This has been conclusively proven, but private banking interests do not want this to know.
Introduction
Private banks create funds for loans with an accounting entry. How the funding for a loan is created is explained in the following quotation.
“Banks do not really pay out loans from the money they receive as deposits. If they did, there’s no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrower’s transaction accounts. Contrary to popular belief, then loans become deposits rather than the reverse.”
Source: The Web of Debt
https://www.amazon.com/Web-Debt-Shocking-Truth-System/dp/0983330859
This is explained by the Fed also as follows
“The actual process of money creation takes place in the commercial banks. As noted earlier, the demand liabilities of commercial banks are money they are book entries that result from the crediting of deposits of currency and checks, and the proceeds of loans and investments to the customer’s accounts. Banks can build up deposits by increasing loans and investments, so long as they keep enough currency on hand to redeem whatever amounts the holders of the deposits want to convert into currency. if the business is active, these banks will probably have opportunities to loan. The $850,000 Of course they do not really make loans out of the money they receive as deposits if they did, they would be acting just like financial intermediaries and no additional money would be created, what they do, then, when they make loans, is to accept promissory notes in exchange for credits, they make to the borrower’s deposit accounts.”
Source: Modern Money Mechanics
https://www.scribd.com/document/7581471/Modern-Money-Mechanics
How Economists Stay Away From the Topic of Money
Mainstream economists have so many simplified assumptions about money that they try to take money out of their equations. This is a point brought up by Steve Keen in the following video.
Source: Steve Keen
A Deliberate Blind Spot?
It is possible that this blind spot was promoted by private banking interests.
Private banking interests do not want economists to focus on money creation — as this exposes the scam that private banks use and how they free ride on the rest of society. And as soon as one understands how money creation works and the function of private banks and private central banks, it becomes virtually impossible to have a conversation with mainstream economists.