In a market economy, the financial system transfers funds from depositors (positive savers) to negative savers (those without enough money and in need of loans to buy property, etc.). Furthermore, non-cash payments are made easier by the financial systems. from natural persons or legal entities.
By law, the financial system controls all services. Deposits can only be accepted by banks, insurance services can only be provided by insurance companies, and large banks are better at managing mutual funds than individual investors.
How money is made In the past, the ability of the ancient Greek states to make their own money was one of the reasons why they were strong. The silver Drachma served as the world’s reserve currency during Pericles’ time. The same was true for Philippe of Macedonia’s gold coins. A certain amount of gold could have been exchanged for each of these currencies.
Today, the USD is created by the Fed and the Euro is created by the ECB. Both of these currencies are fiat money—money with no intrinsic value that has been established as real money by government regulation, and as a result, we must accept them as real money. In the majority of countries, central banks issue paper money and coins, which account for only 5 to 15 percent of the money supply. The remainder is virtual money, an accounting data entry.
We either go through a period of economic growth or a period of crisis depending on the amount of money created by central banks. It is important to note that central banks are private businesses and not state banks. The nations have granted private bankers the authority to issue money. These private central banks, in turn, charge interest on loans to states and have economic and, of course, political power. Countries owe money to private central bankers, and issuing bonds ensures the payment of this debt, so the paper money they use is actually public debt. The taxes that people pay are the guarantee that the government gives private central bankers for repaying debt. People suffer more when the public debt is higher and taxes are higher.
These central bank presidents are not subject to government oversight and cannot be fired. They report to the ECB, which sets EU monetary policy, in Europe. The European Parliament and the European Commission have no influence over the ECB.
By issuing bonds, the state or borrower acknowledges that it owes the central bank the same amount. Based on this acceptance, the central bank creates money from nothing and lends it at interest. This money is lent through an accounting entry; however, the interest rate only applies to the obligations in the loan contract and does not exist in any form as money. Global debt is greater than real or accounting debt as a result of this. As a result, people become slaves because they must work for real money to pay off public or private debts. Only a small number of people are able to pay off the loan, and the rest end up bankrupt and lose everything.
When a nation has its own currency, as in the United States and other nations, it can “oblige” its central bank to accept its state bonds and lend the nation interest-bearing money. Because the central bank acts as a lender of last resort, a country bankruptcy is avoided. Another example is the ECB, which does not lend to Eurozone member states. The countries of the Eurozone are left at the mercy of the “markets,” which impose high interest rates because they are afraid that they will not get their money back because there is no Europe safe bond.
However, the Germans are the primary reason this bond does not exist because they do not want national obligations to be combined into a single European obligation. Despite the differences in Europe’s policymakers, European safe bonds have recently gained ground. The presence of this bond would also result in a devaluation of the Euro as a currency and an increase in Germany’s borrowing interest rates—probably the most serious reason.
Things are different in the United States because the state borrows its own currency (USD) from the Federal Reserve, which devalues the local currency and, consequently, the state debt. When a country’s currency is devalued, its goods become less expensive without lowering wages, but imported goods become more expensive. Having its own currency can help a nation with a strong primary (agriculture) and secondary (industry) sector become more competitive, as long as it has its own energy sources, or energy sufficiency.
The reserve requirement for banks with deposits of between $16 million and $122.3 million is 3%, while the reserve requirement for banks with deposits of more than $122.3 million is 10%. Therefore, if all depositors decide to withdraw their funds simultaneously, banks will be unable to provide them, resulting in a bankrun. It is important to note at this point that the banking system creates and lends ten for each USD, Euro, etc. deposit in a bank. When banks lend money, they make money, but the money they make is money that looks like money on a computer screen and is not real money that goes into the bank’s treasury. The bank, on the other hand, lends virtual money, but the borrower gets real money and interest.