19608623_s

How Banks Work

Banks basically take your money, lend it to your neighbor, charge her a steep interest rate for the use of the loan, keep most of the interest for themselves, and then pay you what little is leftover.

That’s a highly simplified analogy, but it reflects the general concept. For a more detailed explanation, check out the following:

The Great Balancing Act
Banks borrow money from individuals, companies, and sometimes even governments, then turn around and invest the money in securities or through private loans to make a profit. 

Central Banks
You can’t exactly go into a central bank and ask to open a checking account. These are the big guns that establish national policy.

 

 


Copyright © 2017 MsMoney.com, Inc. All Rights Reserved.