The notion of all this does bother some people who may call for reform, but these reforms always involve attempts to contract the money supply by placing limitations on credit, which is not a real good idea actually.During recessionary periods, this is exactly what happens, so calls to reduce the creation of money through methods that contract the money supply, such as excessively high reserve amounts, would just serve to beckon a The extreme example of this would be if credit were somehow outlawed, with no one being allowed to borrow legally. As long as they can still collect debit and credit card fees that will be their focus with rates so low. Apologies! Unfortunatley many of those fees are charged to cover other customers negative accounts that are all pooled togetherBanks are getting desperate these days; bankers have even been known to practically beg customers to deposit money! He writes for an interest rate-tracking Website and maintains his own personal finance blog, the As you said that the interests for $100 fee at 30-year mortgage plan is $94.40, I wonder is this amount what will be paid every year or you mean it represants the wholeIf you bank responsibly, you don’t get fees. In the interest of full disclosure, I am a writer at a personal finance website, and we recently published an Here is th deal on CD’s: Using them as Investing vehicles or income generating tools at this point in time is not worthwhile. If only banking were so innocent… When banks “make money”, they literally “make money”. Which side do you want to be on? Destroying it in this way is a good thing though because otherwise the economy would go haywire,Let’s go back to our simple example. The means by which the banking system creates money by extending credit is a pretty complex phenomenon, to the extent that experts in monetary theory claim that economics textbooks oversimplify the matter in their explanations so to not even give students an adequate picture of what really goes on.So in spite of the brief amount of space we have and the fact that our goal is to explain things in a way that a lay person can understand, we can set forth some of the basic principles here so that you at least come away with a pretty good understanding of how this all works, which will put you ahead of just about everyone.The first thing we want to deal with is what money really consists of, and it isn’t just This was back in a time where money was simply stored, in temples mostly, you would have some The key to understanding what money really is is grasping the notion that it is mostly credit, and only about 1/10 of the money supply is actual currency, with 9/10 of it being credit. YOU ARE LOSING MONEY PUTTING IT INTO THE BANK. They can't be offering to store your money for free? General Disclaimer: See the online credit card application for details about terms and conditions. Commercial banks are able to create money by lending it to their customers in amounts that exceed the reserve capital they keep on-hand. Cd’s certainly have some benefits in ensuring your money is safe and the risk is near zero, but thos paltry benefits significantly outweigh the negatives dependant on your age. In our example, the safety rule takes the form of a ratio of coin (or cash) to deposits of 10%. It is commonly said that we have a debt-based money system in this country, well, that is why. The banks would immediately all go under, people’s deposits with them would mostly go with it, and the government who normally insures deposits to a certain amount can only do so much anyway, but now they can’t borrow either because it’s outlawed, and this plus all the other ripple effects would cause the economy to completely collapse.So this would be the equivalent of nuclear war to the economy, and therefore is something we’d never see, but whatever artificial constraints on the money supply over and above what’s needed to control excessive inflation is going to damage it to some degree.We owe our prosperity to the credit economy actually, not just in part but in whole, and some may claim that we are addicted to credit, and that’s true, but it’s a necessary economic addiction if we want to maintain our present level of economic prosperity.Since we do, the extent of credit as we know it is here to stay, this bank created money, and governments will go to great lengths to preserve this, even spending hundreds of billions of dollars to prop it up if needed.So banks creating money is not part of some diabolical scheme for banks to take over the world, or maintain their present ownership of it, this is simply a way that we can live more prosperously, in the aggregate, much like we can do so from personal borrowing.Eric has a deep understanding of what moves prices and how we can predict them to take advantage. A thrifty plan can pay down debts and start long term savings for retirement, education or a new home.Gahh, the link I tried to embed didn’t work!