|Money literally doesn't exist, is an illusion and made up
Money literally doesn't exist, is an illusion and made upBanking and money in your bank is about 2 things: assets and liabilities.
When you deposit money then that's an asset, the bank pays you back via liabilities (promises to pay you back this amount any time).
They can buy via liabilities, now they are promised a certain stock worth 2 million. But it may come crashing down any time. They bought it for your assets (your bank money).
So now they are invested
But if all people come to drain their money at once the bank will not have enough for supply their customers
They maybe only got 20% of all money in cash
Here is the trick:
They invest more and more in liabilities
They get a stock and promise to pay an amount for it
And the stock grows and grows
Looks a good idea
Bank is now worth 200 billion
But the stock was all virtual
If that stock crashes, all money is lost
This means money is made up all the time (out of thin air!)
Money doesn't exist
And your money is not guaranteed the value printed on it!
The bank could go out of business any time
The only reason we have banks and money is because people trust in it commonly. They trust the bank can pay its customers what they owe them.
Or that the dollar still will be a working valuta tomorrow.
But it may not be so.
In earlier times it was gold, food or homes that people used for paying.
If all people found out the banks don't have the money they say they have, it may all come crashing down.
The money is all invested into high risk investments. Or low risk.
In either case, there is a risk. They are not guaranteed to have your money.
(I read this somewhere on the net, a math professor but forgot the url.. pretty neat I think.)