⭐ Merited by mocacinno (1)
When a bank gives you a loan of 300.000 euro's, they don't have to have 300.000 on their books... They can just create "virtual money" which they loan out to you. IIRC, the percentage is actually a little less than 10%. So, a bank can have 30.000 on it's books, and still give out a 300.000 loan AND get 279.000 in intrest. They don't double their money, they actually multiply their investment by a factor >9...
Sorry, but this is completely inaccurate! Simple real-world personal example from 2017:
I've sold my house to a guy who took a mortgage to buy the old apartment, the price was 140 000E, he took that loan, the bank wired me the money, the full 140 000E, and I spend it like the next day buying my new apartment in which I live now.
So, where are the virtual money and how did the bank manage to pay me the entire amount when they deal only with 10%?
You forget that it's not the bank that's selling you this, the bank needs to pay the actual owner of the house that can go the next day out to Las Vegas and gamble and whore all the sum in a day, and the last time I checked neither casino nor brothels take virtual money!
It is accurate, you have misunderstood. mocacinno is saying that banks create that money out of thin air, not that the money created does not exist.
There are two forms of fiat money creation, the first is done by central banks and the second by commercial banks. When commercial banks lend money by creating it out of thin air with a lower reserve ratio, in some cases 2.5% or even 0%, they are creating money out of thin air even though the money they send you is real. You can spend it on buying a house or take it out in notes and count them one by one.
The point is that it is created because it is not based on a previously existing deposit (or a deposit of at most 10% of what you borrowed).
The system is sustained because people don't run to take money out of the banks - if only 10% did, there would be bankruptcies.