Autumn has its own beauty as the picture to the left shows. The wide variety of colour as autumn fades into winter is truly a sight to behold. It is a sight which often gets overlooked amid the complaints about fallen leaves and sweeping up. But autumn is a good for contemplation and today seemed the ideal time to add to our Company blog. Outside the clouds cover the sky and its a warm wind whipping up the leaves. Everything is surprisingly normal on the surface. Trucks, cars, delivery vans all driving passed as they always do. There is nothing to show that things aren't quite as ordinary they seem. Interest rates are rising. For those with a mortgage it means that they may have to find extra money they don't have to hold on to the house they live in or the house they rent (as their retirement plan). Its because inflation has risen the banks have to lift the interest rates but that hardly makes any kind of sense. Inflation is increasing cost of goods and services - interest is a service so if the interest rates rise then inflation must rise. Ah but it takes money out of the system which means people can't afford to spend as much - which will force prices down. Really? I'm not so sure myself that that works. Well at least my grocery bills don't seem to go down. And banks continue to lend more money now at higher interest rates.
That begs the question:
Where does the bank's money come from to lend to people/businesses? There was a time when a bank had to hold a physical reserve of actual money but now with digital currency there is no need. Wonder if that's why banks fear customers wanting to take out physical money because they simply don't have it. Another reason for closing down branches or making them "cashless", perhaps?
So if banks don't have actual money to lend- what actually are they lending?