Most people still operate under a schoolbook illusion that banks take deposits and lend them out. The truth is far stranger: banks don’t lend existing money; they create new money.
When you sign a mortgage for $500,000, the bank doesn’t go searching for someone who has saved $500,000 to lend you. It simply types the number into your account. That keystroke becomes money; new purchasing power is injected into the economy, backed not by production but by your future labor.
This has nothing to do with capitalism. Saifedean Ammous called it “monetary alchemy”.
Banks have become engines of debt creation rather than guardians of savings. They pay you a microscopic interest rate on your deposits, but they use those same deposits to acquire assets yielding far more. You bear the risk; they harvest the spread. And when their bets blow up, as they did in 2008 and 2023, they don’t face the losses that capitalism demands — instead, the government and central bank step in to rescue them, socialize the losses, and protect institutional survival at all costs.
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Study bitcoin.
When you sign a mortgage for $500,000, the bank doesn’t go searching for someone who has saved $500,000 to lend you. It simply types the number into your account. That keystroke becomes money; new purchasing power is injected into the economy, backed not by production but by your future labor.
This has nothing to do with capitalism. Saifedean Ammous called it “monetary alchemy”.
Banks have become engines of debt creation rather than guardians of savings. They pay you a microscopic interest rate on your deposits, but they use those same deposits to acquire assets yielding far more. You bear the risk; they harvest the spread. And when their bets blow up, as they did in 2008 and 2023, they don’t face the losses that capitalism demands — instead, the government and central bank step in to rescue them, socialize the losses, and protect institutional survival at all costs.
~~~
Study bitcoin.