We live in a world full of hidden realities, some of which are just in front of us or even involve us but are concealed so smartly that we can’t see them. One such shocking reality is our modern world economic system which is designed to bless the elite section of our society. The tool to keep this system running smoothly and uninterruptedly is the Commercial banks
The most common understanding of a commercial bank is that it is the intermediary for transferring money from one party to another, people trust banks and deposit their money in them, and at the time of transactions the bank pays or receives money on your behalf, the main source of income for commercial banks is the interest income which they earn by lending your deposited money to others and earn premium on repayments but unfortunately, that is not simple as it seems or we can say this is half of the truth. The real business of commercial banks begins with Fractional reserve lending.
Yes, fractional reserve lending is a quite sophisticated term and function of banks to keep the 1% domination. You might notice at some point no matter whether the economy grows or not, the banks never get poor, even commercial banks have a hefty amount of assets as compared to any other company. Those assets come from the money out of thin air. Banks are more powerful than the government of the state, actually, banks are those who control the government and state, and that’s why the government issues the monetary policy which is used to control the economy and flow of money within the country through the central bank. Moreover, the laws of the state always support the banking system because of their excessive power, which they can use to turn the country upside down.
HOW FRACTIONAL RESERVE LENDING WORK?
Commercial banks receive your money as deposits, and according to law they’re allowed to lend 10x the money they keep as deposits, which means they are just required to keep 10% of your deposits and lend 90% of them to earn interest, such law allows bank making the hefty amount of profits on your money. even if you want to withdraw huge amount from your bank account the bank will deny to pay and take some time, if every depositor wants their money back, they can’t get their own money. If you have plenty of money in your bank account beware, because if your bank declares bankruptcy you’ll lose all of your money and get a fixed insured amount back.
HOW COMMERCIAL BANK LENDS MONEY?
The lending process is pretty simple and complex at the same time, if you consider general understanding it’s simple lending the deposited money and getting it back along with interest but if it was that simple 90% of the population wouldn’t be the victim of this debt-based banking system. Yes, the fractional lending process creates a humongous deep pit of debt in the economy which later on drastically affects the common man in terms of devaluation of currency and hyper-inflation, to tackle that government and banks combined to slam the common man with contractionary economic policies and snatch the buying power from them to slow down the mess they created, although, the elite enjoy that slammed economy by acquiring as many assets as they can, so they can make more money when the recession will get over. If you wonder how that deep debt pit comes into existence let us make it simple for you to understand.
The Commercial banks get the money in terms of deposits, Suppose John deposited $1000 in the bank, according to law bank is allowed to lend $900 which is 10x of what is required to keep as deposits, in this way, John has $1000 deposited in his saving account and the bank lends $900 to Sarah who needs a loan, now, Sarah has $900 and john Has $1000 which makes it $1900 in the economy, later on, Sarah deposit that $900 in the bank to pay off her dues, so her bank will keep 10% that is $90 and loan off $810 to someone else and that’s how this process goes on and on. In this way banks create money that doesn’t exist in the economy, some banks even lend money before getting funds in terms of deposits and some get loans from another commercial bank on different terms to lend more money. You may think then what’s wrong with this process everybody gets what they need, but the problem arises when everybody has everything they need and they don’t know the price they have to pay later on.
DISASTROUS EFFECTS OF FRACTIONAL LENDING
By using fractional lending banks increase the buying power of people by injecting more money into the economy, when the money supply increases the demand increases as well, but the supply of actual goods and services doesn’t increase at that pace which makes demand go ahead of supply and here the problem begins. The prices of goods and services skyrocket and due to excessive cash flow the currency starts losing its value still the government is happy because the economy is growing but artificially when the bubble bursts government decides to slow down the economy and use contractionary monetary policy to do so, the bank increases interest rates and slows down the lending by keeping money as a reserve, this step creates slump in industry and affect the buying power of common man adversely which eventually creates day to day financial crisis. It takes years for the economy to get back on track and until then the shoulders of the common man are burdened with the country’s financial crisis. In this whole process, the only class of society that gets benefits is the 1% class or elite class for whom this system has been created, they don’t care about rising inflation, currency devaluation, and recession. They know well how to use this flawed system to make real wealth and diversified income streams. The American student loan debt has risen to $1.6 trillion excluding personal credit card debt, this bubble blew up so big that it gave a huge shock to the economy at the time of burst. Moreover, mortgages, credit card loans, and installment plans create money that does not even exist and the debtor spends what they don’t have later on try to earn to pay back what they borrowed, recently government wrote off the student loan debt, which is quite a good news for students but a bad news for economy because this money isn’t wiped out the debt is still here and paid off by government revenues, the tax money. The following statement will enlighten you with the dark secret of the modern-day banking system
“Permit me to control the money of a nation, and I care not who makes its laws”
Mayer Amsheel Rothschild
CONCLUSION
The modern-day banking system is quite dangerous for the long-term interest of society and it can drown the entire society in debt, which has already begun, to avoid the worst situation the authorities should maintain the balance of money supply in the market so that they can save the life of common man from being more miserable. People should learn business and finance to avoid getting into this trap and spending their whole lives repaying that debt, to avoid such a situation youngsters need to learn business, investment, and adding value to society instead of just borrowing the money to buy stuff they don’t need.
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