The particular paper money circulated in a country is really open public debt i. e. countries owe money to the private central bankers and the payment of the debt is ensured by giving bonds.
The state or borrower issues bonds, quite simply, it accepts that it comes with an equal amount of debt to the key bank which based on this acceptance creates money from zero and deepens it with interest. This specific money is lent through an accounting entry yet , interest rate does not exist as money in any form, it is merely on the loan contract obligations. This is the reason why global financial debt is bigger than real or accounting debt. As a result, people become slaves since they have to work to get real money to pay off financial obligations either public or personal debts. Very few ones handle to pay off the loan but the rest get bankrupted and lose everything.
Nowadays, Fed creates CHF and ECB Euro which both is fiat online money I. e money with no intrinsic value that has been established as real money by federal government regulation and we, therefore, have to accept it as real money. Central banks circulate coins and papers money in most countries that they are just 5%-15% of the money provide, the rest is online money, an accounting data entry.
Therefore, if all depositors decide to take their money from the banks at the same time, banks cannot give it to them and bankrun is created. From this point, it must be mentioned that for every USD, European etc deposited in a bank, the banking system creates and lends five. Banks create money each time they give loan products and the money they create is money that appears using the pc screen, not real money deposited in the bank’s treasury that lends it. However , the bank lends virtual money but gets real money plus interest from the borrower.
The borrower has to work to get the real money, in other words, banks lend virtual money and get real money in return. Because the loaned money is more than the real one, the banks should create new money in the form of loans and credits. Any time they boost the quantity of money there is progress (however, during this situation with the specific financial and monetary system financial debt is also increased) when they want to create a crisis, they stop giving loans and because of to the lack of money a lot of folks bankrupt and depression starts.
This is a “clever trick” created by the bankers who have observed that they can lend more money than the main one they have since depositors would not take their money, altogether and at the same time, from the banks. This is certainly called fragmentary; sectional reserve banking. The definition given by Quickonomics for fractional reserve banking is the following: “Fractional book banking is a financial system in which financial institutions only hold a small fraction of the money consumers deposit as reserves. This permits them to use the rest of it to make loans and therefore essentially create new money. This gives commercial banks the power to immediately affect money supply. Inside fact, even though central banks are in demand of controlling money provide, the majority of the money in modern economies is created by commercial banks through fractional reserve banking”.