How do commercial banks “create money”?
The following are extracts from Rev. Charles E. Coughlin’s famous book Money! Questions and Answers. The title is self-explanatory as to the easy-to-read format of this wonderful book. The book is available from N.D.I.N.S, GPO Box 3126FF, Melbourne, 3001 for A$16 plus A$2 postage and handling. When an individual borrows money from a bank, does the banker lend him money that other private individuals have brought to the bank? No. That is what the bankers would like to have you believe, but it is not true. How do banks create money out of nothing by mere book-keeping entries? By the following manufacturing process: * John Jones, a business man, needs $10,000. He goes to the bank and explains the nature of the busi ness he proposes to conduct. He takes to the bank certified figures indicating the value of his business, factory, farm, home, etc. If the banker is satisfied with the amount of real wealth to be pledged, he gives John Jones a note to sign. This note is a mortgage upon the weal
