How Banks Create Money
Posted by nag.rajan on Wed, 2008-10-08 13:29 in
I always thought that money was created by Government and banks just deal with it in largely the following way - take money from depositors and lend it on high interest rates while giving a small share of this interest rate to the original depositor.
It seems this was done a very long time back. Now, banks need to have almost no money from the depositors in the vault to give someone a loan. They "create" money on the go. Sounds incredulous?... watch this video.
http://video.google.com/videoplay?docid=-9050474362583451279&hl=en
This was news to me... Did any MBA's or people working in the financial sector know about this?
I saw this video years back and was amazed. My father had actually explained these concept to me when i was a kid, but these video definitely did put blocks nicely.. :).. Creating money out of thin air..