The Money Rules Of Three Ways Of Making Money12/15/2020
There are fundamentally three different ways to create money in the United States economic system.
How To Make More Money
The first way to create more money is by fiat, which means “by decree.” Fiat means “let it be done.” Only the federal government can create money by decree.
The second way to create money is by fractional reserve lending. Only banks can use this method to create new money by making multiple loans on the same deposits.
The third way to make more money making is to sell something at a profit. Anyone is free to use this money making method.
Money Rules To Create Money Out Of Thin Air
The significant point here is that the government and banks have specific money rules that allow them to do what the rest of us cannot do. These money rules allow governments and banks to make money out of thin air.
All national currencies are now fiat currencies. Fundamentally, this means that there is nothing tangible—such as gold—backing any national currency.
Focus On Fractional Reserve Lending
My focus in these posts is not on the role of fiat money in economic systems, but the effect of fractional reserve lending in our current economic crisis.
The money rules that allow banks to create money out of thin air gives banks an enormous advantage to make money and an even greater advantage to misuse their money rules to create massive profits.
Bankers Running Amok
The following series of posts will demonstrate how the economic crisis that affects all of us, one way or another, is primarily a case of bankers running amok, because they have misused the money rules that allow them to make money out of thin air.