And it’s no surprise, either, as this information is purposefully obfuscated so as not to give the show away.
So, as a PSA, here’s what happens when you take out a loan at a bank:
1. Application: You apply for a loan.
2. Approval: If approved, the bank does not transfer existing money into your account, as many would assume. Instead, the bank creates new money out of thin air, and deposits that newly created money into your account.
3. No Reserve Requirement: Since 2020, there has been a 0% reserve requirement for banks, meaning banks do not need to keep any physical cash or reserves to back up the new money created by the loan. They can have $0 in their savings deposits, and still loan out billions per year.
4. Money Supply: The newly created money increases the total money supply in the economy, which dilutes the savings of dollar holders, making day to day life more expensive.
5. Loan Repayment: As you repay the loan, the money gradually disappears from the bank’s ledger. However, the interest you pay becomes the bank’s profit. Banks get the interest, without having to put up the principal loan amount. All of the upside, none of the downside. In the case where the bank somehow still manages to fail, it gets bailed out by the Federal Reserve; or, if it’s a smaller bank, it gets absorbed by a bigger bank to keep the ponzi going.
6. Rinse and Repeat: The process repeats ad infinitum with new loans, continuously expanding the money supply. This continues until the value of the dollar goes to zero.
#Bitcoin fixes this.
