Our monetary system

[arthursmedley]

Originally Posted by JG4_Helofly

No. It's not false. The money which is lend by a bank did not exist before. It's true that initialy a relatively small amount of money comes from the central bank and goes to the commercial banks, but the commercial banks can lend more money then they get from the CB. Otherwise every bank would have a 100% backed reserve and that's not the case. The min. reserve must be around 7%.

They borrow these funds from other commercial banks and re-lend at higher rates of interest. Thats one of the reasons our banking systems are in big trouble.

Think hard about this. Do you really think banks just 'magic' up money out of nowhere? If they did no one would have any confidence in paper money at all. We'd be exchanging lumps of gold again.

[JG4_Helofly]

Originally Posted by arthursmedley

They borrow these funds from other commercial banks and re-lend at higher rates of interest. Thats one of the reasons our banking systems are in big trouble.

Think hard about this. Do you really think banks just 'magic' up money out of nowhere? If they did no one would have any confidence in paper money at all. We'd be exchanging lumps of gold again.

So how is money created then? Does all the money come from the central bank in your view?
The reality is that commercial bank can lend more money then they have (central money from the central bank) that's why there is a cash reserve ratio which limits the amount of money a bank can lend.
As said earlier, there are some good videos in the internet about all this. Maybe you should look this up. I just know some in german and french, so probably not usefull for you?

[MD_Titus]

pushing digits round spreadsheets.