> Banks don't make their money or derive their power through the 'creation of money'.
A bank just opened and has $0 in the vault
You give the bank $1000
The bank lends me $800
Your current bank balance = $1000
My current bank balance = $800
Total money in the bank = $1800
You might say that the money wasn't created because they can't afford to pay out $1800, but if for some reason at this point they need to pay back the $1000 they can ask another bank for a loan, and point to the $800 they're owed as collateral. On top of that, both the $1000 and the $800 would be insured against the failure of the bank by the federal government. This is a simplified example of course, but when the banking system is working normally it's hard to say that they don't make their profits on the creation of money.
A bank just opened and has $0 in the vault You give the bank $1000 The bank lends me $800
Your current bank balance = $1000 My current bank balance = $800 Total money in the bank = $1800
You might say that the money wasn't created because they can't afford to pay out $1800, but if for some reason at this point they need to pay back the $1000 they can ask another bank for a loan, and point to the $800 they're owed as collateral. On top of that, both the $1000 and the $800 would be insured against the failure of the bank by the federal government. This is a simplified example of course, but when the banking system is working normally it's hard to say that they don't make their profits on the creation of money.