Question of the day: Q: If all new money is created by banks when they make loans, what new money is created to pay the interest due on those loans? A: None. Question of the day II… Q: Where does the money come from to pay interest? A: Someone else’s loan principal.
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Wealth to Debt Once, the more money we had, the more wealth we had. Now, the more money we have, the more debt we have. “Note that although the system of fractional-reserve banking creates money, it does not create wealth. When a bank loans out some of its reserves, it gives borrowers the ability to…
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Thus… “Thus, in a system of fractional-reserve banking, banks create money.” – N. Gregory Mankiw, Ph D., Professor of Economicsat Harvard University, Macroeconomics, Fifth Edition, pg 484
DetailsWhat is Wealth? Wealth = Innovation + Raw Resources + Labor That’s also why silver worked; as well as sea shells, coffee beans, furs or tobacco. They were all examples of wealth based money – not simply barter, but used for money. So, you see, we don’t have to use gold to have a wealth based money…
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Think About It First, we have to borrow, just to have a medium of exchange. Then, we have to borrow to pay the interest that is due on the initial borrowed money. Q: Wouldn’t that make it impossible to get out of debt? A: That is obvious.
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4 of the Most Important Quotes in Economics: 1. “…the actual creation of money always involves the extension of credit by private commercial banks.” – Russell L. Munk, Assistant General Counsel, Department of the Treasury 2. “Money is created when loans are issued and debts incurred; money is extinguished when loans are repaid.” – John B. Henderson,…
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