Modern money mechanics, as described in the banking handbook with this same name, is a system whereby money is created out of debt. This system is used in nearly every civilized country and as of late has been the biggest contributer to the credit crisis. I will explain this system in detail in the following sections, but as a quick foreword, your financial problems are not your fault.
Money, that pretty green piece of paper with official looking seals all over it, doesn’t exist. Money is created out of the need for more money. I’ll give you an example. The government electronically sends the federal reserve a request for ten billion dollars. The federal reserve replies and then starts to print the money and these bills become federal reserve notes. The government in turn begins to print out some official looking pieces of paper called government bonds. A 10% reserve is held out of the ten billion and the nine billion is the excessive. Because that nine billion is consitered the excessive, new loans can be created based off of that amount.
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