Creating wealth out of thin air

[CoMp1eX]

I watched a video yesterday about banking. It said that over 90% of money is created from debt, so basically out of thin air. Only a small amount of physical money was made.

I've heard this before, but it got my mind running this time. Since they can create money out of thin air, so could I right?

Many entrepreneurs do it with lead generation, affiliate marketing, selling e-books, creating music beats, or providing other services.

They are basically creating wealth with their own minds/creativity.

Not sure where I was going with this :coco:, just wanted to get my thoughts out.

What are your thoughts on "creating wealth"?

 

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[GlobalWealth]

If you want to fully understand how money is created read these 2 books:

"The Mystery of Banking" by Murray Rothbard
"The History of Money" by Jack Weatherford

The money book is a bit more entertaining as the banking book is more analytical. But if you read both you will have a pretty good understanding about how money is created.

Govts create money out of thin air because they have the monopoly to do so. You and I don't have this power. But we can create wealth through creation of productive assets. Look at it like this, you can start a business that didn't previously exist and you are now creating wealth. But the money you are earning is coming from the economy of which you have no control of the money supply. You will be competing for this money along with every other business. But govts can just print more money to pay their bills.

 

[BurnBright]

It is called the money multiplier and it is a main component of the fractional reserve banking system modern economies use. Don't get caught up in the conspiracy theorists and wackos that post crap on the net. Remember there is no IQ test needed to use the net or mandatory mental health exam. If you want to learn more pick up a money and banking college textbook.
As for creating wealth, yes this is what entrepreneurs do by creating value which translates into wealth. In lead generation you provide value to the product or service provider by supplying high quality leads and to the customer by providing options for what they seek. In affiliate marketing you provide value to the product source by assuming the risk of advertising expenses.

 

[andviv]

well... what if you open a bank then?

 

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[GlobalWealth]

well... what if you open a bank then?

ah, now that is the way to really "make" money. I have some friends who have done this in NC and it has been quite profitable.

As the banks are the closest to the print machine and have the ability to leverage their deposits, this is the ultimate way to "make" money.

The average bank in the US has 6% capital reserves. So for every dollar on deposit, they only keep $.06 in cash. They loan out your $.94 and earn interest on YOUR money. A community bank is in a great situation because when they loan out the $.94 into the community, it eventually ends back up in the bank as a deposit and then they loan out $.88 (94% of .$94). And they earn interest again. And again, and again, and again, and again. This is the effect of the money multiplier that BurnBright mentioned. And this is what 99% of the population has no understanding of. It creates a perpetual money machine.

 

[Chitown]

Global,

Just out of curiosity, what are the profit margins at a bank?

 

[GlobalWealth]

Global,

Just out of curiosity, what are the profit margins at a bank?

Not sure, but its easy enough to look up in Yahoo finance. Pick a publicly traded bank or 2 and look them up in Yahoo finance. Then you can look at their financial statements there and find their margins.

the important thing to remember with banks though is leverage.

 

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