On June 10, 76 percent of Swiss voters voted "no" in the referendum on the Swiss sovereign wealth initiative. This "initiative" was a bill that limits the legitimacy of creating money in the Swiss Central Bank without the rest of the banks in the country. But how do banks create money? Is not the task really assigned to the central banks alone?
In our popular imagination money is the currency, the currency is money, but this is a minor definition of grasping the meaning of money from an economic perspective. Economics defines money as everything that constitutes an exchange environment and a unit of accounting and storage of value. Based on this definition, the amount of money in the world today is very large, and currencies are part of it. Most economists estimate that only 8 percent of the amount of money traded around the world is from paper and metal currencies.
In the modern banking system, central banks create money in many forms, including paper currency, while banks create money in another way because they do not have the right to create money in the form of paper money. So how?
They create money through loans, they give loans beyond their assets, and not only to lend what is deposited or what the central banks only lend, but lend to weaken it. Of course, the expansion of this lending is governed by a mathematical equation linked to the reserve ratio of deposits held by banks and imposed by central banks. For example, if the ratio of 10% is equivalent to the value of the maximum multiplier = 110% = 10, the bank is entitled to lend up to ten times the remaining deposits in the bank after deducting the reserve.
While teaching curricula in universities put this process under the authority of the Central Bank through the bank reserves in the form of loans, but many researchers in this area and a lot of experts in global central banks say this model comes out of the process of creating money from the hands of central banks And concentrated in the hands of private banks. The thrust of the Swiss draft resolution was to prevent banks from lending more than their deposits, which means they can not lend more than they have. But trying to envision a system of creating different money means the end of the financial system as we know it, and it is difficult to predict what will happen to the financial markets and economies if the process of creating money is more difficult, and controlled by central banks exclusively.
For the Lebanese "news"
SOURCE
In our popular imagination money is the currency, the currency is money, but this is a minor definition of grasping the meaning of money from an economic perspective. Economics defines money as everything that constitutes an exchange environment and a unit of accounting and storage of value. Based on this definition, the amount of money in the world today is very large, and currencies are part of it. Most economists estimate that only 8 percent of the amount of money traded around the world is from paper and metal currencies.
In the modern banking system, central banks create money in many forms, including paper currency, while banks create money in another way because they do not have the right to create money in the form of paper money. So how?
They create money through loans, they give loans beyond their assets, and not only to lend what is deposited or what the central banks only lend, but lend to weaken it. Of course, the expansion of this lending is governed by a mathematical equation linked to the reserve ratio of deposits held by banks and imposed by central banks. For example, if the ratio of 10% is equivalent to the value of the maximum multiplier = 110% = 10, the bank is entitled to lend up to ten times the remaining deposits in the bank after deducting the reserve.
While teaching curricula in universities put this process under the authority of the Central Bank through the bank reserves in the form of loans, but many researchers in this area and a lot of experts in global central banks say this model comes out of the process of creating money from the hands of central banks And concentrated in the hands of private banks. The thrust of the Swiss draft resolution was to prevent banks from lending more than their deposits, which means they can not lend more than they have. But trying to envision a system of creating different money means the end of the financial system as we know it, and it is difficult to predict what will happen to the financial markets and economies if the process of creating money is more difficult, and controlled by central banks exclusively.
For the Lebanese "news"
SOURCE