On this week’s Corruption Radio (October 17th) we bring to light how 95% of all money in circulation is created by commercial banks out of thin air.

How Much Debt Is Too Much?

What happens is you go to take out a loan for a car, home, or other large purchase. At the very moment you sign the loan agreement, committing yourself to pay bank the principle plus interest, the bank creates the principle by entering the amount into their computer screen. The money does not come from anywhere because it did not exist before you signed the loan application.

See, the bank considers your agreement to pay them back an asset, backed by the item you will purchase with the money. So they use this “asset” on one side of the transaction, and balance it on the other side of the transaction by creating the same amount of the principle in what is commonly called “checkbook money”. These are not physical paper dollars, but rather a commitment from the bank to pay that money when demanded. These electronic commitments transfer between banks and in most case cancel each other out so very little actual money changes hands. In other words, Chase bank will have outstanding commitments to Citibank and vice versa; only the small variance in commitment amounts causes actual transfer of money (and sometimes not even then).

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