You have a friend who lost his job and is out of money. He comes to you for a loan. You’re willing to lend him money, but how much can you lend? At most, all you have. You cannot just create money to give your friend. Why then can banks do that?
You have a friend who lost his job and is out of money. He comes to you for a loan. You’re willing to lend him money, but how much can you lend? At most, all you have. You cannot just create money to give your friend. Why then can banks do that?
Fractional reserve banking allows them to loan out more than they actually have.
They charge a huge amount of interest on the loan. As long as enough people make good on their loans rather than go bankrupt, the bank makes money.
