Lets do a little thought experiment, shall we?
Lets say that I want to borrow 5000 from my bank.
You also want to borrow 5000 from your bank.
The banks are not the same bank, and right now its not really important what their names are. For now lets just settle for calling it my bank and your bank.
My bank doesn’t lend me their own money. Instead they take out a loan in your bank.
Your bank does the same thing. They take out a loan in my bank.
Both You and I now have 5.000 in our individual accounts.
What about the banks?
My bank owes your bank 5000, and your bank owes my bank 5000.
These numbers kinda cancel each other out, don’t they?
If I owed You 5000 and You owed me 5000, we wouldn’t owe each other anything, would we?
This must leave the banks at an even balance towards each other. But You and I still owe the banks the money they lent us.
When You and I pay back the money we owe – 5000 from both of us – even without interests, the banks would have created money at a value of 10.000… out of nothing.
Does this happen?
If it does… is it legal?