The Bank

Think about this system and you will understand a simple truth: money, which appear in the economy, sustained by the faith of people in their value. What happens if you suddenly investors start to withdraw their deposits from the bank? It turns out that the paper money in the bank is much smaller than the electron. And people, when the pick up deposits, demand of paper money. Of course, these paper money is also no provided, but they are in modern economies are in government securities, that is, their value is guaranteed by the state. When the bankrupt a bank, a state in which the bank exists, continues to exist. And as long as people believe that cash paper money secured financial power of the state, they believe them more than the records in an electronic database of the bank.

The bottom line is that banks have confirmed State the right to grant a loan several times more money than the amount of money stored in bank accounts. In different countries, this ratio is different, but everywhere he is different at times. In this case, the electronic money in the account equated to the paper. It turns out that every time we borrow money in the banking system, someone gets issued to us in lending out money to his account in the same banking system. And if people do not take money from the bank cash (or more often if people trust the banks, this does not happen), the banking system gets the opportunity, keeping his money in the amount of X, to increase its loan portfolio on the value of kX. Perhaps economists do not want this see or understand, but this explains the proverbial economic growth.

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