So I think the baker, banker scenario is a little misleading there..it may be the correct model if you are talking about money deposited in cash, so i suppose yes the $10,000 you put in as cash. or even more substantial gold! leaves the bank access to 9000 of usable funds (in the stated 10% fraction model). so i see your logic that it 'could' loan out 9000 dollars, leaving a scenario where yes if you wanted your ten grand the bank only has 10% of it! but also in that model (this is where the slight of hand happens just like legalese isn't English when you think it is! nearly everything a policeman or a lawyer or judge ever said to you will have had a second meaning that could be even the opposite of the original word re-defined in Blacks law dictionary!) sorry i digress!...in that model the bank could also keep the 9,000 as a reserve. this would then allow it if someone else came for a loan of $90,000 for a house, to be able to make this loan under the rules of the 10% stated reserve rules. remember the person has deposited an IOU promissory note that he will pay the $90k which is backed up by the deeds to his house that the bank can keep & sell the property from under him if he misses a payment or two!!..a good example of how it works is this. not my own words but it explains the system very well and is put in equally demeaning "layman's Terms" in a childlike simple way!..interestingly seeing as we are discussing candle sticks, the star of the story is called Jack, Jills in there too but that's a different bedtime story!;)... I have visibly edited it a little to fit our scenario and to explain a little better.
The mechanics of modern banking are opaque, misunderstood and arguably dishonest. Modern fiat money, the dollar, euro, yen etc are all based on debt. (BTW FIAT means.. let it be so!.. in latin! Alakazamm! Abracadabra!;) For every dollar in existence, there is somewhere an IOU for the same amount. (its beyond that. total USA debt is $15.26 Trillion. USA G.D.P $14.28 Trillion, so even at 100% tax for everyone!! the debt could not be paid in a year.
then you would have the next years debt because at 100% tax No one would have any money! so would have to borrow 100% to live. leaving the debt the same or worse including interest...ad infinitum. )
The way it works is best illustrated with an example of a typical mortgage.
Imagine Jack wants to by Jill’s house for $100,000 and he has no money to buy it so he goes to his local bank and asks for a mortgage which is approved. The bank will ask Jack for a promissory note, an IOU, for the $100,000 and once he signs it, they open an account in which they create from nothing. (actually they would need $10,000 in reserve to do this but they can get that of someone else!) $100,000 for Jack in exchange for his IOU. That $100,000 is a liability for the bank, their asset is the IOU. The bank just ‘created’ $100,000 which is backed by the good faith of Jack to pay it back as well as the deed to the house he bought. Now the bank loans that money to Jack, with compound interest. The interest is the fee the bank charges for monetizing the debt. Jill would not have wanted an IOU from Jack for the 100K, so the bank did him the service of converting his IOU into dollars, and for this service they charge him interest. As Jack pays down his mortgage principal, the value of the IOU will be drawn down as well, until all the money ‘created’ is destroyed, and the IOU is worthless.
The money never existed before Jack signed his IOU. It was created entirely and only as an expression of his promissory note. All car loans, student loans and personal loans are created in this way, and it is the exclusive right of banks and the Fed to create money except for coinage which is handled by the Federal Government. Banks are restricted as to how much money they can create by the amount they have on reserve with the Fed. The formula is complex, but, for simplicities sake, it is around 10 times as much as they have on reserve, (actually more). If the bank has 1 million dollars on reserve with the Fed, for which they are now paid interest, they can create and loan out about 10 million dollars. Banks are paid for the privilege of creating and leasing money. This is our modern, fractional reserve banking system.
How does this differ from how other things that are borrowed or leased? When a house is leased, the owner must buy the house, then rent it, forfeiting his capital in exchange for an asset, the house. The typical return on residential real estate is about 5%, anything with a return of 10% would be snapped up in an instant. So how much do banks make when they loan their ‘created’ money out? Let’s assume Jack has been a good boy, and gets a fixed rate loan of 5% on his $100,000 mortgage for a period of 10 years. The bank is obligated to leave $10,000 in reserve, or 10% of the amount loaned out, but they do not give up the money, and they are now paid interest on it, so the bank now has no borrowing cost, only an opportunity cost. The return on the bank’s $10,000 is Jack’s compound interest payments of 5% on $100,000, or $5,000, a neat 50% return on their money. As he pays off the principal, the banks also frees up the corresponding amount in reserves, so the margin stays the same. On a 20% interest credit card with an outstanding balance of $10,000, the bank is holding $1,000 in reserve on which it is making 200% a year. Of course the bank has salaries to pay, rent, administration fees, marketing etc. but it is, nonetheless, a very lucrative business model.
What is special about banks that allows them such profitability? First, what is money? Money is two things: a store of wealth, and a means of exchange. Many would define money as human labor. Let’s say Jack is a truck driver and makes $50,000 a year, (very close to median US household income). Jack has recently married, bought a house and become a good boy and doesn’t pitter his money away anymore on wine and women, he now saves $1,000 every month, about one week's work for Jack and the average American family (before taxes). When he asks his bank how much they will pay him on his saving account, they say 1%. This seems legitimate to Jack, since they loaned him $100,000 at 5%. In fact, it seems like a very low margin to him as he assumes that the banks are loaning the money that other people like Jack have on deposit. Banks do not loan out deposits, deposits are used for reserves.
For Jack to earn $100,000 would take him two years of driving a truck, for which he would be paid by a bank a few thousand dollars in interest a year. For a bank, however, $100,000 is created digitally in milliseconds, and they are paid $5,000 a year in interest and if the borrower defaults, the bank will foreclose on the house with the full force of the law. Jack drove a truck for 2 years to make 100k, it is a store of value of his work, but what did the bank do in exchange for the interest on the 100k they loaned Jack?
Money is human labor transferred to a store of value, like dollars, euros, gold or silver. For example, when someone pays $30 for a kilo of fish, they are not paying for the fish in the ocean, they are paying for it on their plate. The difference between a happy fish swimming in the deep blue sea and a grilled halibut glistening before you is human effort. All other businesses that want to get a return on an asset must first buy the asset with money earned through work. This is not the case for banks. They earn interest on something they don't create.
In fact, a Minnesota Judge, Martin V. Mahoney, and a jury threw out a foreclosure on defendant Jerome Daly for just that reason. Daly argued that the there was no consideration in the contract between himself and the First National Bank of Montgomery. Consideration means both parties must give up something for there to be a contract. For example, if Jack offers to paint Jill’s apartment for free, there is no contract between them. If Jack bails on his offer to paint, Jill cannot sue him. Judge Mahoney ruled the bank gave up nothing in the contract. They created the money out of thin air hence they did not commit anything to the contract; there was no consideration and the bank could not foreclose.!!!...
For everyone except banks, money is an expression of human labor, creativity, or even luck. But for banks, money is something they simply 'create' in exchange for IOU's. What Jack works ten years to pay back should not have the same value as what the bank created in the blink of an eye. They are two different things, yet they are treated as one... I will continue myself from here.
Also..everyone does forget the main point! the capstone of the pyramid in the fractional system, the Central Bank! in your case the "Federal" Reserve Bank, which correctly was pointed out earlier is A PRIVATE COMPANY WITH SHAREHOLDERS!! the main observation of money as debt to a criminal cabal of "Banksters" that do get the right of magick! to create money from nothing and" lend" the government/ you it at interest, The bank was signed into "power" by the signing of the federal reserve act in 1913 on jekyll Island by president Woodrow Wilson. At ransom because America was bankrupt by J.P MORGAN, Goldman Sachs, Kune & Loeb, Lehman Brothers, The Schiffs and Rothschild Banking Dynasties...at night without a whisper to congress or the public!
Ever wonder what Inflation is? why money is worth way less now than it used to be? it's the fact every dollar printed owes say 20% to the "FED" (a group of banks not the government) in interest. how is this paid back when every dollar printed to pay it back owes another 20% Ad Infinitum...So how could your government pay them back? ever wonder what your income tax is!? well that's a way of paying the convenient 20% figure with labour of the populace! you'd think it was going to the government to pay for admin and infrastructure, but they got plenty of other taxes for that!! roads, tobacco, alcohol the list is endless..the IRS is another illegal company, not even based in the USA, it is actually based in Puerto Rico and has no authority in the separate states of America. it is provable and has been so in court that there is No Law that can Order you to pay income tax under the constitution.(you need to be very clever and use the correct terms to argue this!) it is just a set of private collection thugs with government backing to pay back the interest on the money the "FED" "loaned" the government who smash your door in if you don't pay and can even get you in prison but Unlawfully. Learn the difference of the two terms... illegal means just breaking a commercial law (a statute) not wearing your seat belt, speeding etc -Unlawful means you have broken the Law of the land that everyone agreed upon in the constitution and bill of rights...broken someones right to freedom - kidnapping!) broken someones right to life- Murder/Homicide) etc, there is a big difference...it is illegal not to pay your forced upon you income tax...a rule break) but it is unlawful for the IRS to force you to pay it!..a breach of the bill of rights and the Constitution...a much bigger issue!! good look arguing the case though!! as like i said all court proceedings and legal letters are in legalese, a totally separate language so you'd better get studying your Blacks Dictionary!
there have only ever been two presidents that tried to free the people from the clutches of the bankers and their Fiat Fractional Tyranny and there
Also don't forget the fact that the money system starts off from the Unlawful..(but perfectly legal in the governments eyes!..now we know the proper meaning of the terms) "FED" as lets say a 10 dollar reserve loan. This can then be used by the bank to lend out $100 dollars because it only needs 10% in holding of a loan it makes...this is how the system inflates so that only 1% of money is actually printed cash! and even that is only a promise to pay?? not a backing of an amount of gold!! i ask you promise to pay what?? all the rest is just numbers in computers...mainly created by algorithms that react millions of times a second using programed rules but i presume we may get into the rigged, high tech, high risk for the punters,( not the house! the people who set the gold price and can sway markets with ease and insider trading covered by such entities as the Bank of England Nominees and swiss banks) ...gambling casino, that is Derivatives and CDswaps at a later date. that stuff just gets funny how stupid the whole system is!!
finally on the subject of loans! and interest the new rules should be seeing as the american "tax" payer is owed by the Banks 8.5 TRILLION! dollars, well the private "FED" put in 5.5Trillion of there own money you just have to pay the interest! and the government/your $3Trillion thats $3.5ish Frockin TRILLION Dollars. every time you go in to the bank to get a loan! you still have to pay it back but it is at - thats negative 1% interest so they actually have to pay you back a little for creating the money and bailing them out!!!! HAHA....
This is the reason we are in such a Frockin Mess and it is only getting worse!!
just as a final thought! i think (objectively as an Englishman viewing intently from afar) that Voting for Ron Paul is actually the only chance you guys have of saving yourselves from total financial collapse leading to god knows where you Gun crazy madmen!;) He is the only politician, never mind presidential candidate I have ever seen that has even mentioned that the Federal Reserve is a Private institution not owned by the people of the USA but loaned to them by a group of "Banksters" never mind the fact he wants it Auditing! (because its private and wont show its accounts to the government) and wants it eventually dismembered!..Also he wants the Constitution Re-Instating as most of it has been torn up by the politicians paid for by the Bankers and military industrial complex President Eisenhower warned of in his speech!....It is the only way for the glimmer of hope that was for a flighting moment! "the land of the free and home of the Brave" to have rights you actually have to fight for them or they are not rights at all they are privileges. given to you by owners!..
It was to this Home of the free people of my country and others in europe set sail for all those years ago escape the tyrannical pyramidal system of control that had been created by the Rothschilds and Black nobility of Europe and spread round the word as the British Empire! with such men as Cecil Rhodes of The Scholarship fame (and the fact Zimbabwe used to be Rhodesia!) who actually paid for the establishment of the Council on Foreign Relations! who control all three of the other presidential candidates in the election as they are members! even better is the CFR want America dissolved and part of the NAFTA/North American Union of Mexico, Canada, and USA so see the constitution as a barrier to progress!!! bye bye! USA if they get in..next stop one world government to rule the superstates and China Base Commercial/democrtaic-quasi capitalist Communism! and one baby for all!....don't like it! off to the camps! or even better switch yer chip off/cancel yer credit as there will be no cash soon! its illegal/ not Unlawful (if we remember;) to have more than £1000 here in uk in cash with no reciept and in the US if you buy something with 10,000 dollars cash the FBI is supposed to be notified!!
no one accepts cash anymore! you used to get discount for it! ha..
so please America, as the leaders of the world please do something to take back that great country that was founded in response to the wicked evil way My Once "Great Country" began ruling the world all those years ago!
those interests that ran "the empire the sun never set on" funded by killing Raping and Drugging the World made sure of just that! they kept there money going through trusts, Banks and inheritance...they have constantly pecked and slithered their way into running the worlds first Super Power through their vice grip hold over banking investments politics and war!..it was a different bank that assassinated Abe Lincoln for printing debt free government money called greenbacks than the one that shot JFK for saying he was about to do the very same thing. different Bank Name different times but same Family lines and Financial interests owned both Banks. they've been at it for years!.... the constitution was written to be a masterpiece in political freedom but it cannot protect anyone if you let it be taken to pieces bit by bit...I truly believe Ron Paul is the answer to starting to put this world right again...bring all troops home...stop spending money on shit!!...stop borrowing till you cant borrow any more...he has addressed all these issues. something the CFR scum do not...they are puppets all working for the same master working to destroy your country and the rest of the world for financial gains and brief massive power..
when Benjamin Franklin Actually signed the Constitution and created the USA when asked the question! well what have ye wrought, a Republic or a Monarchy....he replied! A Republic!...if ye can Keep It!
please America! Wake Up!...educate yourself about the propaganda puppet show that is the media! and the paradigm Control Matrix that has been created at your expense to keep you from realising the truth that we have owners and are not free! it is all an Illusion so we do not revolt!!
If you read this far im very impressed and ask you vote Ron Paul...well as an advocate of freedom i ask you to vote whoever you choose but believe if you study the facts and look into all the candidates I belive the truth will make you vote for him anyway.. The man has gone on about all this for 30 years and never changed his tune! I mean he could be the ultimate planted deceiver or false prophet or even the antichrist! but again That is another Story! ;P hehe