Banks operate on a fractional reserve system where they keep only about 10% of deposited funds as reserves while lending out the remaining 90% to borrowers, which creates new money in the economy through the lending process; this means a single deposit can potentially multiply into ten times its original value as it gets repeatedly deposited and lent out, effectively allowing banks to create money out of thin air.
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The Shocking Truth About How Banks WorkAñadido:
Wait, your bank doesn't actually have your money right now.
>> [music] >> Like you think it's just sitting there in a vault.
It's not.
The second you deposited it, your bank lent most of it out to someone [music] else.
Banks keep maybe 10% of your money on hand.
The rest? Gone.
Out as loans, mortgages, credit cards.
Your thousand dollars became nine hundred dollars in someone [music] else's account.
And they're paying interest on it. To the bank.
>> [music] >> Not to you.
And here's the wild part. That nine hundred dollars gets deposited again.
And lent out again.
One deposit can turn into ten times the original amount in the economy.
They literally create money out of thin air.
I just dropped a full video explaining [music] exactly how this works. Go watch it.
Your relationship with your bank will never be the same.
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