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Where the Banks “Make” their money.

May 14, 2013

Have you ever dreamed of being able to make money appear out of thin air the way a magician makes rabbits and doves appear out of seemingly bottomless hats. Within certain limitations the banks can do that exact thing. It is called the Fractional- Reserve Banking System and is used throughout the world.

The fractional system in many countries works on the premise that banks only need a fraction of the money that people deposit to cover immediate withdrawals.

This goes with the premise that not all people will take all of their money out of the bank at the same time. The banks can lend up to 90% of the money that has been deposited. If it is redeposited by the persons who borrow it, it can be re-loaned creating an almost endless supply of Phantom Money.

The 10%  or 1/10 (one tenth) that banks cannot loan is called the reserve and the inverse 10 /1 ( ten to one) is called the  Reserve Ratio. The Reserve Ratio is also called the Money Multiplier or the Economic Multiplier by the banking system and its proponents. It is the Phantom Money created out of thin air that did not exist until you borrowed it.

This system supposedly limits the money creation that occurs in the banking world and keeps a reserve to serve immediate withdrawals. However banks can go back to the central bank of most countries for reserve extensions which makes  the system a bad joke for all practical purposes.

The central bank can also initiate an infusion of “High Powered Money”  which then can be multiplied by the banks in question. High powered money is the sum of currency in circulation plus the banks reserves. In simple terms it is mostly cash money that was printed rather than phantom money that was created by a notation in a ledger or in a computer.

Therefore since the banks can get reserves from the central bank whenever they want, reserves are a non-issue. This also means that banks are almost fully in charge of the money creation process. This has been very evident in Canada, New Zealand and Sweden where reserves have been abolished. In Australia there is a 1% Non-callable reserve. This is really turning the money creation process on its head.

The whole banking system has been described as a giant Ponzi Scheme that relies on the next bunch of suckers to pay off the first ones.  This is made worse if one adds in the fact that the government gives the banks license to create money. It is no surprise that the banks are making record profits.

So the next time you go to your bank, usually on the best corner in town, to negotiate or re-negotiate your mortgage don’t feel that you have any friends there. Your best course of action is to educate yourself by learning all you can about the process. You must also know current interest rates so you know if the loans officer is trying to pull the wool over your eyes.

You must also be prepared to take your business to another financial institution if you cannot get a decent rate. Unless your negotiation skills are really good, you will save a lot of money by bringing in skilled professionals who know the system. Our team can save you up to half of the money ~real money~ you are currently obligated  to pay the bank, if you can qualify.

If you do not like paying the banks any more than you absolutely have to, contact me to find out if you can qualify.  You cannot make a change if you do not make a change.  I primarily service the Okanagan Valley, but if you are willing to do a Skype session , I can help anyone in Canada and some parts of the USA.

My information is Fred Murray:  at  phone -250.766.2106, email – and Skype – fred.murray50.

  1. Rinus Borgsteede permalink

    Way to go Fred!
    The explanation is very clear. There is really no much choice when it comes to banks but to be one!
    Banks sell “debt” only. People are standing in line to buy debt so the banks set rules that suit only them! They are “never” your friend even though the employees can be nice people. Being over 60 I thought I could get senior rates at our local credit unions. No, forget it. I went to a national bank and
    saved $300.00 and more a year.
    You on the other hand help people get at least a better deal as a negotiator. You are impartial to who might be lending the money. You still work for the banks but people have a better chance.
    And then there is me. I help people reverse roles with the bank. The only way to beat the bank is to be the bank. It is easy to do but not for everybody.

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