Did you know commercial banks create money out of thin air every time they loan money?
You may have thought that when you take out a $30,000 car loan, the banks takes $30,000 from their vault, and loan you other people’s savings.
This is not the case. They literally create $30,000 out of thin air, and deposit it into your account.
The video below is the Cowboy Economist explaining exactly how this works.
Spoiler: The video includes a little bit of accounting and a little bit a math.
And now, without further delay, I bring you The Cowboy Economist, and his lesson on how the private sector finances its deficits.
And to get a fuller picture of money creation in our economy, you need to watch his next video, in the blog post linked to below.
It will be illuminating. I guarantee it.