In today’s global monetary system, money is created out of thin air — like magic — but it can disappear even faster.
As I explained in a webinar for our Boom & Bust Elite subscribers, I’m not just talking QE here.
Almost all of the money in our system is created by banks. They are able to issue loans against just 10% of their deposits as reserves for losses…
But the truth is those are not their deposits, they’re ours. They are creating loans for us… against our own deposits.
How backwards is that!?
The Federal Open Market Committee (FOMC) can change the banks’ reserve requirements, allowing them to issue more loans. And even the Fed can loan money to banks for short periods of time.
But it’s all a sleight of hand. Everything runs on credit. We create something from nothing.
The money doesn’t really exist.
This is what our monetary system is built on… but when banks stopped lending after the financial crisis, this system of credit started to fail. Money stopped happening.
That’s when the Fed stepped in…
If the banks weren’t going to make the loans to expand the money supply, the Fed would simply inject new money into the system to make it up.
Ordinarily, QE is supposed to provide liquidity short term only in case of emergencies, like the meltdown of 2008 and World War II.
But in today’s something-for-nothing economy, it’s one big magic show — now you see it, now you don’t. Keep the bubble going, or the financial and banking system will melt down like in the early 1930s.
Think back to last week when I talked about how the Fed created the greatest depression in modern history by constantly stimulating the economy with lower interest rates.
Such excessive lending and spending always happens in the fall bubble boom season of our long-term economic cycle. But central banks only tend to exacerbate those bubbles by setting interest rates lower to keep the party going.
