Where does money come from is a question that most of us never think to ask, even though in one way of another money affects almost every aspect of our lives.
Now, if you give the question a few seconds thought, the answer may seem obvious; take any note out of your wallet and you’ll see the words “Bank of England” printed on the front.
But the twist in the story is that the only money that the Bank of England creates is the cash that and this cash makes up just 3% of the money we use.
So where does the other 97% come from? The surprising fact is that the vast majority of money that exists is actually just numbers in computer systems. Money now is electronic. And these numbers are created through an accounting process used whenever a bank makes a loan.
In fact, the number that you see at the bottom of your bank statement or on the screen of an ATM doesn’t represent a pile of money in the bank’s safe; that number is the money.
So, when we borrow from a bank, we’re not borrowing money from someone else’s life savings; it’s actually newly created money. In fact, brand new money is created by banks every time somebody takes out a loan, overdraft or credit card.