In a normal world, your bank pays you interest on your savings. It takes your money, pools it with other people’s money, and loans it out.
WRONG WRONG WRONG, Banks have NOT operated like that since 1971.
Pay Attention folks. When you take out a LOAN, they are NOT loaning you money they have or anybody else has, ALL LOANS in the US are FUNDED with BRAND NEW MONEY. The Fed gives Banks Instant 100% credit for YOUR Promissory Note and the MONEY is CREATED OUT OF THIN AIR to meet the DEMANDS of said Loan. The bank turns around and GIVES it to YOU with Interest Attached. They profit off the difference the FED charges them and what they charge you in INTEREST.
If you think otherwise, you are a FOOL!
Nope.
Every loan is fully funded. That means either the bank already has money to lend you, mostly from deposits, or they borrow money after you take out your loan.
They mostly would borrow from other banks which have extra money, mostly from deposits.
Banks aren't magically lending without borrowing money from someone else.
The Fed gives Banks Instant 100% credit for YOUR Promissory Note and the MONEY is CREATED OUT OF THIN AIR to meet the DEMANDS of said Loan.
They used to borrow from the Fed to do that, rarely, but since QE, banks have so much extra cash that current loans like that from the Fed are only $6 million, with an M.
And there is a haircut, so they wouldn't get 100% of the value of the collateral.
They profit off the difference the FED charges them and what they charge you in INTEREST.
Why would they borrow from the Fed when they already have deposits they can use?