When banks issue loans to the public, they create new commercial bank money.
When a customer repays a loan, commercial bank money is destroyed.
The banks keep the interest as profit.
There're a lot of misconceptions about the way banks work.
There was a poll done by the Cobden Centre where they asked people how they thought banks actually operated.
Around 30% of the public think that when you put your money into the bank it just stays there and it's safe, and you can understand why because every child has a piggy bank where you keep putting money in and when it's a rainy day you smash it and you take that money out and spend it.
so money can much more easily come in and out of their economy. The idea is that this will encourage investment to come in from richer parts of the world, and that all of their problems will be solved from this investment.
Today most of the money in circulation is electronic money, it's bank demand deposits that sit in our accounts.
So in a way the legislation's got to catch up with the developments in electronic money and the way that banks actually operate.
Money held in bank accounts are called demand deposits.
This is an accounting term the banks use when they create credit.
Banks follow the same process when they create loans.
All money held in bank accounts is an accounting entry.
Commercial bank money.
The reality is now that most money is not paper and it's not metal coins.
It's digital. It's just numbers in a computer system.
Both President Johnson and Francisco Franco were vilified. A new low in public protest added strain on Spanish-American relations. Order in the court, order in the court. I want Americans and all the world to know. America has no regard for conventions of war or rules of morality.
Now the banks are pretty much the same, but they want to see the money in their account at the Bank of England before they consider a deal complete. So for example, if you are buying a house from somebody who banks with a different bank, then what'll happen after you've spent a quarter of a million on a house is you'll tell your bank to transfer some money to the house seller's bank, and what the bank will do is instruct the Bank of England to move $250,000 from their account at the Bank of England to the bank of the house seller.
That money is being distributed according to the priorities of the banking sector, not the priorities of society.
The banking sector itself grew from 1980 $2.5 trillion to $40 trillion by assets.
In 1980, global bank assets were worth 20 times the then global economy. By 2006 they were worth 75 times, according to the UN.
As the following chart shows, total bank assets of UK banks as a percentage of GDP remained relatively stable at 50-60% up to the end of the 1960s.
After that they shot up dramatically. And the real money in the world to be made today is not by producing anything at all.
It's simply by forms of speculating, basically making money from money.
That's the most profitable and by far and away, the biggest form of economic activity that exists in the world today.
An increase in the money supply = A likely relative increase in economic activity. The effects of rapid credit expansion. Inflation is a rise in the general level of the prices of goods and services in an economy over a period of time.