Money as debt

Money as Debt The video “ Money as Debt” by Paul Griggon in 2006 and is a fascinating one which is highly informative. This video spans over a time of 45 minutes and describes how basic banking works and gives answers to the question where money come from. The video states that in early times, the banks use to make money with the use of gold or someone deposit gold in the bank. But thinks have changed in recent times, and bank allows people to borrow money as long as they return it. This means the money is backed by mortgage or loan. The reality is that bank loans money which does not exist. But as soon as people realize this a protection right has been created which limits banks money making called “ 9 to 1 Fractional Reserve System”.
Basically, if the bank has $1K cash with them the they can lend up to $9K to borrowers based on the 1: 9 fractional reserve system regulations. This does not mean that banks cannot limit the earning of money up to $9K. In reality, they can make money up to $90K which makes it 1 to 90 ratios. For instance, if the bank initially had $1K cash in possession, it means the bank can lend up to $9K to public. So, we can assume that if a person X takes the loan of $9K to buy a car from PersonY. Based on the person X’s promise to pay the money back, bank will create $9K cash and loan it to person Wythe tactical part is the Person Y will then deposits $9K in the bank. Based on the 9: 1 federal reserved regulation, the bank can then reserve $900 ($9K/10) and loan out the rest which is $8100 ($90:$8100 = 1: 9). Moreover, it moves on to the next loan. Transaction until the bank cant reserve money anymore. So the video explains how banks work.