At Super-Advice we are about all things financial, but more importantly, helping people understand so they can get ahead financially.
In today’s blog post we share with you how banks make money out of thin air.
Did you know that banks can create money out of nothing?
That money that you borrow when you go and buy a house is literally created out of nothing.
Most people don’t realise this.
It’s called fractional reserve banking, banks literally have a license to create money.
How does that work?
Most people think that a depositor puts their money in their bank, their savings, and they receive a bit of interest. Well, that’s true.
Then the bank takes that money and lends it out to a borrower who has to pay the interest to get the money. That’s true as well.
But let’s say there’s a pile of money within a bank, they can actually lend out much more money than what they have. They’re allowed to create money out of nothing. Poof! It just appears!
When you go and get approved for a mortgage, they simply just deposit newly created money into your bank that came from nowhere.
It’s called fractional reserve banking.
What we think about fractional reserve banking
It’s actually the fabric and the system that holds our whole way of life together. So even though it seems unfair and banks can take it way too far, in our opinion.
It does provide our system of being able to borrow money and buy houses and, and buy things that that, that we can’t afford.
We think it’s great for buying those larger purchases like houses, because in reality not a lot of people can save a million dollars or so for a house.
What is not good for is those impulse buys like tv’s, we want you to aim to be financially free and use the banks money to your advantage.
How crazy is it though that the banks can just magically click their fingers and create money out of nothing?
That’s a wrap
So what do you think? Did you learn something new today? We love educating and helping people learn all about insurance and finances.
If you need any financial help or advice please get in touch with us at Super-Advice.