THEN there's the fact that banks take your money to borrow it out to other people, collecting a high interest rate; for ease of argument, we'll say 10%. In turn, the bank pays you a small fee for using your money; again, for ease, we'll say 1%... but that fee is only paid to you only under the condition that you do not take your money out. If you do take out your money, not only do you lose that "bonus", but you will also more than likely have to pay for the use of taking out your money (check fees, more than five withdrawals a month, having less than $100 in the account, all are met with service fees).
In other words, the banks will pay you for the use of your money, unless you yourself use your money, then you have to pay the bank.
But, where is this money? Is your money in the bank? No! Remember, your money is loaned out; fact of the matter is, no one's money is in the bank, at least not all of it. Think about it, that's how the Depression came about, how banking systems fail, how the Savings and Loans failed (Clintons, 1990s)... the bank members all tried to withdraw their money within the same time period. Banks need the thought of there being money so they can produce loans, for without the loans, they won't get a fresh supply of money coming in. People withdraw their money means no money in the bank, which leads to loans defaulting, which leads the banks into the red.
Now here is where things get interesting...
When it comes to the government, the Federal Reserve doesn't give the government money. They produce a promissory note that states the government owes them so much money; the government then spends this note, or states this much goes here, this much goes there. Budgets are made to allow for this influx of money, even though there is never any real transference of funds. Since this is, in effect, a loan, not only does the government pay back the dollar amount, but the interest as well. Sounds just like a normal bank dealing with normal people, right? Right, and that's all it is, a bank.
The interesting part is that this bank is not federally owned or operated. It also is not a reserve, there is no money there. The Federal Reserve is a privately owned organization. Let me say that again: the Federal Reserve is a privately owned organization. ALL banks are privately owned (credit unions, however, are not), and the Federal Reserve is no exception.
...
So money doesn't really exist, has no value other than what people put on it. There's this big thing about the gold standard, but that's for something else altogether. Other people are using your money, to which the bank gets a lender's fee. This interest is then used to build up the banks status and standing. The more assets the bank has, the more money it can loan out, the more interest it brings in, the more it can loan out and so on. ALL banks within the Federal Reserve's control, those with the FDIC label, feed into the Federal Reserve, which does the same with loans to the government: our banks hold this much money, so we can give you this much in return.
BUT THE LOAN ISN'T BASED ON ANYTHING. The loan is based off of the money that the bank cycled through (see the above paragraph), money that went through the loan / interest / loan cycle!
(I've been reading up on this subject lately. Rather fucked up stuff.)
