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How Banks Create and Destroy Money.

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How Banks Create and Destroy Money
Creation and destruction of money by banks is just like renting a house from a party and
further renting one room from the rented house to another person. The party from whom we have
rented the house will receive the rent for their property and we will also get a proportion of the
cash from the third person whom we have rented a room. The third person has the power to live
in the same amount of money. Creation of living power or purchasing power is like creation of
money in the banks and when the third person leaves the room and empties it, he does not pay
rent and purchasing power is destroyed. Destruction of money by banks is like does not paying
the rent and leaving the room further causing the destruction of living power. Just when you take
back the keys to the room, the living power diminishes and initial position is controlled [Robert
Bonomo (2011)].
When someone deposits an amount in the bank, the bank considers that the person will
not withdraw all amounts at once so the bank will keep a small proportion as reserve which in
the above analogy will be keeping the number of rooms with us. The bank further lends
proportion from this cash to another person. Now the first depositor thinks that he has the
purchasing power because he has deposits in the bank and the person who received the loan also
has the purchasing power which means the bank has just created money from nowhere and the
purchasing power from the same amount of money has been increased. In the reverse process,
when the person receiving the loan returns it to the bank, the person reduces his purchasing
power and the total amount of money becomes equal to the initial starting point which means the
newly created money has been destroyed by the bank.

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How Banks Create and Destroy Money Creation and destruction of money by banks is just like renting a house from a party and further renting one room from the rented house to another person. The party from whom we have rented the house will receive the rent for their property and we will also get a proportion of the cash from the third person whom we have rented a room. The third person has the power to live in the same amount of money. Creation of living power or purchasing power is like creation of money in the banks and when the third person leaves the room and empties it, he does not pay ...
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