Tuesday, June 5, 2012

Money (1): Ever Wondered Why There's So Much Debt

Ever Wondered Why There's So Much Debt?
Watch this 3 minute video to discover where all these debt came from, and why it can't be repaid...

You may ask how is this possible - if I borrow 500K from bank A to buy a house, the bank will have to remit the money to the seller's bank (say bank B). Where does bank A gets this 500K from?

But bank B will be making loans as well - and some of the sellers will be using bank A. At the end of the day, all the loans from different banks will more or less contra off each other. Whatever tiny amount one bank owes to another will be settled using the Reserve Bank money.

In comparison to the HUGE amount of loans made per day, only a very tiny amount of Reserve bank money is required for this daily inter-banks settlements. In UK where the bank created 'quasi money' has grown to 2 trillion pounds, the Reserve Bank money is only around 60 billion pounds.

HUGE amount of money was created out of thin air this way. 97% of Britain's 2 trillions pounds money in circulation was created this way. It is the same all over the world. The consequences to the society is deep and all encompassing. It will make you revolt if you realize how much it affect our daily life.

Next: Money(2): Money is Debt

No comments: