Eversince I've been reading news about billionaires keeps popping out of nowhere and millionaires are as though it’s the 60s, I've wondered how they got there. And now I figured.

Are we too ignorant to think why there are millionaires and billionaires? Are we too ignorant to think why do we have to work to get money and in the end spend that money to eat instead of work to eat? Are we too ignorant to think why are banks are issuing so much credit cards and ATM cards and let you shop using that cards and lets you deposit money and coins using a machine that run 24hrs? If a bank has so much money, shouldn’t it be big enough to store all those money? What exactly is inflation and deflation?

Before I continue, let’s categorize the type of money we’re using to pay for our items using my own term. Let’s call the physical money you have in your wallet ‘Cash’ and let’s call the money you have in your bank ‘Money’. Simple enough? Ok let’s go.
There isn’t a starting point in explaining how money works, really because money does goes round but let’s just start with the paycheck you received.

The Scenario
You received $1000 cash from the company you’re working with. Now you have in your hand, $1000 legal tender cash. You deposit the $1000 note into a new bank call Bank A. You being the first customer of Bank A, Bank A now have $1000 in cash.
There is also another new bank; call Bank B. Bank B has $0 money.
A newly registered company named Industry A, customer of Bank A, needs $1,000,000 to start its business. Industry A went to Bank A to loan $1,000,000 worth of Money. Bank A only has $1000 cash. But Industry A wants it in a form of Money. So Bank A can freely loan the $1,000,000 to Industry A.
Some of the Money is used to pay the contractor called Sam who is a customer of Bank B. Sam’s paycheck is $2000 which is deposited into Bank B. Bank B now has $2000 worth of Money.
After sometime, Industry A pays off the $1,000,000 loan to Bank A. Bank A now has $1,001,000 worth of cash and money.

I can go on into how a bank depends on other banks, central banks and the government to make more Money. But reality checks here. We can safely say that 90% of the transactions happening in Singapore involve Money and not Cash. So, in simple term, “More debts more money”. If were to all withdraw all our savings from our banks, the banks won’t have enough cash. And if we are able to pay back our debts, the banks cannot make money.

Think about it. We’re slaves to the banks because the only people who can create money out of thin air are banks. We’re only able to earn Money which is also created by the banks. This is the reason why we have inflation. When there are low demands on loans, we’ll experience deflation.

Something for you to ponder….

This entry was posted on Friday, August 17th, 2007 at 12:11 am and is filed under Rambling. You can follow any responses to this entry through the RSS 2.0 feed.
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