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Banks pay depositors "interest" for storing their money. Banks earn income by loaning out money for "interest". The "interest rate" banks pay is less than the interest rate banks charge. That is how banks earn profits.
All things being equal, the more money banks lend, the more money banks can earn. What is the limit? How much money a bank has, limits what a bank can lend.
Otherwise, banks could loan out money they don't have. You could do that too. They could loan out money that doesn't exist. Money would be created out of thin air.
Not so long ago, modern banks were repositories of gold. Depositors stored gold in bank vaults. Banks issued receipts to depositors. Depositors began using these receipts in exchange for other things, transferring a portion of their gold to someone else. These bank receipts were money.
Banks issued their own money which was redeemable in gold.
Banks today no longer do this. But you can still buy gold and store it in a vault in New York, London or Zurich.
You could go there, right now, and buy a 400 Troy ounce 99.5% pure "good delivery" gold bar for about $300,000 USD. (Prices vary by the minute.) You would likely never see your gold. You would get a receipt, just the way it once was.
You can, of course, buy smaller amounts of gold.
Your gold would be safely stored in a vault run by Via Mat, a Swiss company like Brinks, which specializes in secure storage and transportation of valuable property.
Banks can no longer be trusted to do what they once did.
Banks like to maximize the amount of money loaned out which is earning money for the bank. Today banks are fractional-reserve lenders. By law, they only need to have a small percentage on deposit of what they lend out. "... nowadays banks operate the wrong kind of business to be willing and reliable custodians of your gold."
Let's not forget that the money that banks loan is not their own, it belongs to depositors — even if banks had 100% reserves made up of other people's money. But they don't even have that. So they are creating money out of thin air, without any help from the central banks. But central banks are another story . . .
next HIGH FINANCE part 2: The State