Money Management : How Do Banks Work?

[zncus]

What a shitty deal! Not to mention, the incredible amount of inflation a bank creates with this process.

So Mr Monroe, you are a lair, a cheat and of course, a true banker.If we, as a people, do not reform the banking system, we will, by first inflation, and then by deflation, end up homeless in a country that our ancestors conquered. These are not my words. These are the word of Thomas Jefforson.

[zncus]

The bank repeats this process a total of ten times until the fractional reserve decreases the amount of the primary $100,000 deposit to a insignificant value and no more loans can be given.

So the bank ends up making ten times the 5% percent which comes out to 50% interest. The bank makes 50% percent interest on the initial deposit of  $100,000 and pays the depositor of that money 2% interest

[zncus]

If I deposit $100,000 in your bank, your bank will lend out all of this money minus a small reserve, which is %10 for most banks. So the bank will loan out $90,000. Once the money is loaned out ,the promissory note that the borrower of this money signs, promising to pay the bank back the borrowed $90,000 in full PLUS THE 5% INTEREST becomes an "asset" to the bank. The bank treats this "asset" as real money and therefore it will make another loan equal to $90,000 – 10% = $81,000.

[zncus]

Dear Mr Monroe, you are a real peace of work. You do not mention fractional reserve banking and the fact that a bank will lend out ten times the amount of money it has on deposit, at interest. Since you are incapable of telling the truth, I will tell the audience how this works

[h4ppychap]

err!!!! Did you forget to mention FRACTIONAL RESERVE BANKING or did I mis that part.

[FortNikitaBullion]

The thing is, the banks make 5%, but on someone elses' money. It's a lot different than you or I making 5% on our own money, because the bank can operate with far more money than it truly owns (its equity).

[nokomarie1963]

Very clear. Thanks, I made sure to show it to my kids.

[daddyjuju]

quick and to the point