Saturday, August 18, 2012

Lending Others' Property

Everybody plays the fool sometimes
There's no exception to the rule
--Aaron Neville

When individuals do not consume all of their income, they can lend out some of their savings to others. The borrower then repays those resources, usually with interest, in the future.

In a fractional reserve, fiat money system where credit is created out of nowhere, banks do not primarily lend savings--since they lend out far more than they collect in deposits. Yet, borrowers take control of economic resources.

Is this magic? Where do those economic resources come from if they don't come from depositor savings?

They come from you and I.

Banks lend our resources without our consent. Borrowers pay banks for do doing so. If borrowers don't pay back the loans, then it is you and I, not the banks, that are the primary loss takers.

1 comment:

dgeorge12358 said...

It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary.
~Ludwig von Mises