how do banks create money out of thin air …

buildings with glass windows

henry ford supposedly said – it is a relief to banks that nobody understands the banking system , otherwise there would be a revolution overnight

banks follow the fractional reserve system – where they can create money out of thin air

let’s say the amount of customer money deposited with them for safekeeping is , say X

they can lend 9 times X to other companies in the form of loans at a rate much higher than what they are paying you

sometimes the interest rate paid by the banks is so low that you will be effectively losing money due to inflation

so , the best thing to do is to have 6 months of your expenses in a liquid account with the bank and invest the rest in other instruments like stock market , real estate , money market funds

if you don’t follow the stock market daily , you can choose a low cost index fund – a fund that mirrors the stock market – there are very few fund managers that beat the stock market on a regular basis – plus there are commissions , yearly fees – all of these will reduce your gains in the end

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