Not just investing. Every time banks loan money to someone they steal from everyone.
Fractional reserve banking means that banks only need to have a fraction of the money their customers have in accounts actually in reserve, based on the idea that not everyone will withdraw all their money from the bank at the same time. For example, if people have deposited €1000 at a bank, the bank may be allowed to have €1500 is customers’ accounts, because only a fraction needs to be covered by actual money. The rest is just entries in a database.
Because of the difference between what was deposited and what they are allowed to have as ‘virtual’ money in accounts, they can loan out the difference. So when someone asks for a €500 loan, they approve it and put €500 in the customers account without actually having more money in reserve. They basically create that €500 out of thin air. (Which the customer eventually has to pay back with real money).
Because the total amount of money actually represents the total amount of value created (e.g. by labour and manufacturing), and they just created more money without actually creating more value, the bank just caused a little bit of inflation by issuing that loan. Meaning every time they issue a loan everyone else’s money becomes worth a little less, and this difference eventually ends up in the bank’s pockets.
Not just investing. Every time banks loan money to someone they steal from everyone.
Fractional reserve banking means that banks only need to have a fraction of the money their customers have in accounts actually in reserve, based on the idea that not everyone will withdraw all their money from the bank at the same time. For example, if people have deposited €1000 at a bank, the bank may be allowed to have €1500 is customers’ accounts, because only a fraction needs to be covered by actual money. The rest is just entries in a database.
Because of the difference between what was deposited and what they are allowed to have as ‘virtual’ money in accounts, they can loan out the difference. So when someone asks for a €500 loan, they approve it and put €500 in the customers account without actually having more money in reserve. They basically create that €500 out of thin air. (Which the customer eventually has to pay back with real money).
Because the total amount of money actually represents the total amount of value created (e.g. by labour and manufacturing), and they just created more money without actually creating more value, the bank just caused a little bit of inflation by issuing that loan. Meaning every time they issue a loan everyone else’s money becomes worth a little less, and this difference eventually ends up in the bank’s pockets.