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How loan broker s create money in the US economy


If bank s were Islands, the land of money savers would be on one side of its waters and the land of money borrower s on the other side of its waters. The bridges between the three would be loan broker s and the federal government regulating the flow of every transaction would be the waters.

With this picture in mind, lets say we have three Islands named A, B and C. The ocean which is the federal reserve, deposits 1000 sea shells on Isaland A.Isalnd A by law must keep 20% of the sea shells and make the rest available for loans. A loan broker sells the availability of shells and loan prgrams of Island A to a would be entrepreneur from borrower land. The entrepreneur gets 800 sea shells and starts a business by buying commercial real estate sold by a citizen of Savers land who deposits 800 shells in island B reserve bank .

Now, isalnd B reserve bank by law must keep 20% of its deposits and make 640 shells available through loan programs to citizens of borrower land. A loan broker gets news that isalnd B reserve bank has some new programs and builds a bridge connect Isalnd be and part of borrower land where people need such programs. Another citizen of borrower land gets a 640 sea shell constrcution loan and hires people from savers land. who build the house, get paid and deposit 640 sea shells into island C reseterve bank .

Isalnd C reserve bank in turn make available 512 sea shells available for other loan programs through another loan broker bridge and the cycle goes on.

Over all 1000 sea shells were deposited by the ocean on Isalnd A and 1952 shells were put into circulation via bridges created by loan broker s another 488 sea shells still in bank reserves also available for circulation.That is a total of 2440 is now in circulation.

In other 1440 has been Created by the services of loan broker s. So, next time you see a loan broker , give him/her an appreciative pat on the shoulder. Because they are in actuality the money makers of our economy.

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Joe Cole

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