Mind-Blow #1

Where Does Money Come From?

Not where you think. And once you see it, you can't unsee it.

What You Probably Believe

Most people think banks work like this:

The Story We're Told
  1. Banks have money (from deposits or reserves)
  2. When you need a loan, they lend you some of that money
  3. You pay it back with interest
  4. The money returns to the bank

This seems logical. It's what we're taught. It's what most people assume.

It's also completely wrong.

A Simple Question

You want to buy a house for $300,000. You go to the bank for a mortgage.

Question: Where does the bank get that $300,000 to give you?

Common Assumptions (Wrong)
  • From other people's deposits?
  • From the Federal Reserve?
  • From the bank's own money?
The Actual Answer

The $300,000 is created from your signature on a piece of paper called a promissory note.

This sounds impossible. Let's walk through exactly what happens.

What Actually Happens

Step 1
You Create Something Valuable

You sign a promissory note — your written promise to pay $300,000 plus interest over 30 years. This is a negotiable instrument with real legal value.

Step 2
The Bank Records It As An Asset

Your promissory note is worth $300,000 (because you promised to pay that). The bank records it as an asset on their books — just like they would deposit a check.

Step 3
The Bank Creates A Matching Deposit

The bank creates a deposit of $300,000 in your account. This is their liability to you. Their books balance: $300,000 asset = $300,000 liability.

Step 4
The Money Now Exists

The $300,000 in your account didn't come from anywhere. It was created when you signed the promissory note. Your signature literally created the money.

The Key Realization

Only you can promise to pay from your future earnings. Not the bank, not gold, not the government — you. Your promise is the source of value. The bank just converts your promise into spendable form.

This Is Not Disputed

This isn't a fringe theory. It's documented by the institutions themselves:

"Commercial banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created." — Bank of England, "Money Creation in the Modern Economy" (2014)

The Federal Reserve, Bank of England, and standard banking textbooks all acknowledge this. The truth is hiding in plain sight — it's just not widely understood.

Try This Yourself

Ask your bank: "When I got my mortgage, which account did the $300,000 come from?" They can't answer — because it didn't come from any account. It was created.

What About Federal Reserve Notes?

Look at a dollar bill. It says "Federal Reserve Note" at the top.

A "note" is a promise to pay. Federal Reserve Notes are just standardized, transferable versions of promises to pay — originally based on promissory notes like the one you signed for your mortgage.

The Historical Arc
  • Before 1933: Federal Reserve Notes were redeemable for gold
  • 1933-1971: Only foreign governments could redeem for gold
  • After 1971: Federal Reserve Notes are backed by... promises to pay

Today, all money is essentially someone's promise to pay. Your promissory note is the same type of instrument as a Federal Reserve Note — just not yet standardized for circulation.

Credit Card vs. Debit Card

This happens in miniature every day:

Credit Card
  • You create a new promise to pay
  • The merchant gets paid immediately
  • New money enters the economy
  • You've literally created money with your signature
Debit Card
  • You use money that already exists
  • No new money is created
  • You're just transferring existing funds
  • Moving promises, not creating them

This is why banks push credit cards so aggressively — every swipe creates new money and new debt.

The Mathematical Problem

Here's where it gets concerning:

A Simple Loan

You borrow $300,000 at 5% interest for 30 years:

  • Money created by your signature: $300,000
  • Total you'll pay back: ~$580,000
  • Extra needed for interest: $280,000

Question: Where does the extra $280,000 come from?

Answer: It can ONLY come from other people creating new promises (new loans).

The Island Economy

Day 1: Empty island, no money exists

Person A borrows $1,000 at 10% interest (creates $1,000)
Person B borrows $1,000 at 10% interest (creates $1,000)
Person C borrows $1,000 at 10% interest (creates $1,000)

Total money created: $3,000
Total money owed: $3,300 (including interest)

Problem: There's only $3,000 but $3,300 is owed! Someone MUST borrow more or someone MUST default. This is arithmetic, not theory.

What This Means

For the System
  • Requires constant growth (new loans to pay old interest)
  • Inflation is guaranteed
  • Total debt can never be paid off
  • Bankruptcy is a necessary safety valve
For You
  • Your signature has immense power
  • You're not "borrowing" — you're creating
  • The consideration question becomes real
  • The "debt" may not be what it appears

Verify This Yourself

Research Paths
  • Ask Your Bank: "When I got my mortgage, which account did the funds come from?"
  • Read the Statute: 12 U.S.C. § 411 says Federal Reserve Notes must be "redeemed in lawful money." If FRNs ARE money, what is "lawful money"?
  • Search: "banks create money when they make loans" — even the Fed admits this
  • Read: Bank of England's "Money Creation in the Modern Economy"
📍
You understand the mechanism. Now let's look at what your promissory note actually IS — and why it's equivalent to a Federal Reserve Note.