As the question suggests, i want to know where extra money come from
Banks receive money from savers, they use that money to loan out to people at higher rates.
Say there is only £10 in circulation, and im the one to have it, I stick it in a bank giving me no money and a rate of 5%. So i should expect around £10.50 in a years time. But where does that 50p come from. Maybe it comes from the interest when they lend it out, so the bank loans out the £10 for a rate of 17% for one year so they expect a total pay back of £11.70 after that year, but where does that £1.70 come from?
In real time if we all paid back our borrowings and we all took out all our money from our banks, do they have enough money?
I know if all customers of one bank went to get their money back they cannot give everyone their money back cos its been invested.
Does the money making machine just dish it out to banks?