Totally indebted - you don't learn this in school

Visuals by Stanka / written by Alen V.

These days we all got to know, that bankers are certain kind of people who are holding hostage innocent citizens, even whole countries, with huge piles of dept. We’ve learned, that they have enslaved us, taken our freedom away and have made us work in exchange for peanuts.

For me, it was a true financial awakening. I didn’t know any of this. When I needed a loan for a car or a business, I’d go to a bank, and if my credit got approved, I celebrated it as if I had gotten the cash for free. I never worried about interest rates, small printings, or about the fact where the money actually came from. But I know now.

Before and after the crash

This crisis is just wonderful. Never before have I learned this much about banking, monetary policies, bonds, financial markets – and my role in it – as in these recent years. It never interested me. However, if somebody explained to me in school how this system works, it would probably be different.

But for some reason, they never told me. I know about every medieval war battle and chromosomes, but I don’t know how the banking system works.

When you look at all the available data, it’s almost impossible not to hate banks or at least to have an unfavorable attitude towards them. What stunned me the most was the term “fractional reserve banking system”, which means that banks can lend out at least ten times the amount of money than they actually possess.

A feeling of deception aroused in me. I felt cheated, because I thought that they had the money there – in the bank – as real tangible cash, and that they were managing people’s deposits by lending out the same money as credit to potential borrowers.

However, this is not the case. I will not go into detail, because it has widely been reported across the Internet, but not by the regular media. Why? Oh, the media owns money to the banks, and they might lose revenue from advertisement. If you have such obligations, you simply don’t do anything what would displease your customers.

You don’t learn this in school

The banks have enormous power, because they can multiply money they don’t have; I mean physically it is nonexistent. It is virtual money, existing only on computer screens. Here is a very simplified example. Let’s say you’ve inherited $/€/£100.000 from your uncle, and you’ve decided not to spend the money, but to keep it as a deposit in a bank.

You are very pleased because you are getting a 4% annual interest on that amount, and the bank clerk keeps shaking your hand, congratulating you on the wonderful deal you’ve just made. The truth is, that the amount you will be making is peanuts in comparison to what they will be making.

Your 100.000 gives them the right to hand out credit worth at least one million in ‘digital cash’ on which they will on average earn around 6% per year. The translation is that you will be making around 4000 and they around 60.000 from your money – at least.  Read more