From a favorite paragraph, to a very important few:
Henry Ford once said that if the public understood how money was created, “there would be a revolution before breakfast.” And what is this process that Ford found so appalling? It is simply this: before you sign the mortgage to buy your home, the note to buy your car, or the credit slip to buy a hamburger, the money to buy the home, the car, the burger does not exist; it comes into existence by the very act of borrowing it. The bank does not lend out the money it receives in deposits; this it holds as a reserve against losses, in a process known as “fractional reserve banking.” The money you deposit is the “fractional reserve,” and against this reserve they lend 10 times as much which they create ex nihilo, by pressing a few buttons on a computer. A banker will never lend reserves. Indeed, a bankster is more likely to lend you his wife than the bank’s reserves: it is merely immoral to lend his wife; it is illegal to lend the reserves. And in banking, morality counts for little.
98% of the money supply is created by the banks as loans; the government creates only the coinage. Some might say that the government “owns” its own bank, the Federal Reserve, which can also create money. However, the government does not own the Fed. The Federal Reserve is a system of 12 regional banks that are owned by all of the federally chartered banks in their regions. These banks in turn own the Federal Reserve System in proportion to the size of the regional banks. The New York Federal reserve owns the majority of shares in the Federal Reserve System, which is why the President of the New York Fed always sits as Vice-chairmen of the Federal Reserve. And the controlling interest in the New York Fed is held by Citibank and JP Morgan-Chase, which means that the whole monetary system is mainly responsive to the needs of two New York City banks.
Same author though: John Medaille, “There is No Such Thing as a Bank Loan”