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>For example, let's look at your checking account. A banker's not a middleman here Yes, he is. He takes your money and lends it out to others, whom he charges
by crdoconnor 12y ago
>For example, let's look at your checking account. A banker's not a middleman here
Yes, he is. He takes your money and lends it out to others, whom he charges for the privilege. That's how fractional reserve banking works.
Of course, these days since interest rates are zero, that's not really a profitable line of business. It's mostly used to upsell the more profitable products like mortgages or credit cards.
- esja 12y agoThe banker actually creates brand new money to give to whoever is approved for a loan - he/she doesn't use your money for that purpose.
- deleted 12y ago[deleted]
- refurb 12y agoNot sure why you're getting downvoted. A fractional-reserves system does create more money than what is deposited.[1] [1]http://en.wikipedia.org/wiki/Fractional-reserve_banking#Example_of_deposit_multiplication http://en.wikipedia.org/wiki/Fractional-reserve_banking#Exam...
- spott 12y agoYes, but the service that he provides is a secure place to store your money. You pay for it by giving the bank money that it can use as "collateral" (in the fractional reserve banking sense) for the loans it gives out, instead of paying with fees.