Village Bank

CALL YOURSELF A BANK AND THE WEALTH OF THE PEOPLE AND A NATION WILL BE TRANSFERRED TO YOU ( WHAT BANKERS FIGURED OUT LONG TIME AGO ) For simplicity assume that a village bank is capitalized for $1,000,000 and starts business as the only bank in the village. A 5% reserve ratio means that if a bank is capitalized for one million dollars, the bank could give twenty loans of one million dollar each. Assume that after one year, 10 customers of the village bank decide to pay off their loans and they draw the funds from banks in other cities. Thus, the village bank gets 10 million dollars principal payment. Remember that the village bank was only capitalized for one million dollars. How did the bank get $10 million principal payment if it only had $1 million dollars in capital? To illustrate the point, assume that a village has 100 households and only one bank. The new village bank is capitalized for one million dollars. Borrower "A" borrows one million from the bank to buy "B's" house. After, the sale, "B" deposits the one million in the village bank. Now the village bank has its original one million dollars and it has a mortgage contract for one million dollars at 5% annual interest plus say $40,000 annual principal payment. Repeat this process 20 times in the village and at the end of the year the bank has given twenty loans of "one million dollar." Thus, for the first year the village bank collects 5% interest on $20 million loans, amounting to $1,000,000 interest. Additionally from each of the 20 borrowers the village bank collects $40,000 principal payments per annum, amounting to $800,000. Now, in addition to the said $1,800,000 principal and interest, assume that after one year, 10 borrowers of the village bank decide to pay off their one million dollar loans and they draw the funds from the banks that are outside of the village. Thus, the village bank gets 10 million dollars principal payment in addition to the $1,800,000. How did the bank get $10 million principal payment if it only had $1 million dollars in capital? Yes my friend, the whole banking system is getting principal payments from all of us when in reality they did not have the funds that they claim they gave to us as loans. The village bank recycled 2o times the same $1,000,000 and then the borrowers to pay $20,000,0000 to the bank in principal payments when in reality the bank never had more than one million it its vault. Note that the village bank could only give 20 loans of one million dollars each. Let me repeat again. It works like this: assume that the village bank is capitalized for $1,000 and commences business. Borrower (A) borrows 1 million dollar from the village bank and buys "B's " house. In this transaction the bank gave its $1,000,000 capital away. However, "B" who receives the $1,000,000 from "A" , despoits his $1,000,000 in the village bank. Now the village bank claims that it has $1,000,000 deposit and lends it to "C" to buy "D's" house. Then "D" deposits the said $1,000,000 in the village bank and the bank lends it to "E" to buy "F's" house and the process continues. The same one million dollar is given as a loan 20 times and then demand is made upon the borrowers to pay $20,000,0000 to the bank in principal payments when in reality the bank never had $20,000,000 million. Yes my friend, the wealth of 20 villagers was transferred to the village bank in the form of principal payments, when the village bank did not have $20,000,000. The same $1,000,000 was given to 20 different people. The above mentioned Ponzi that is now legalized as banking is a tool for transferring the wealth of the People and the nation to the banks. This is why banks never let go of principal payment and interest only loans are rare. Principal payment received by the bank is free money given by the public to the bank, when in reality the bank used the above mentioned Ponzi plan to loan the money to the borrowers, although the bank did not have the capital to make such loans.