Real Estate Investor Magazine South Africa October 2014 | Page 17

UPFRONT

J

ust a year ago, in our June 2013 cover story
“Exposed! Teetering House of Cards: The
truth about your financial debt” we exposed
the shaky house of cards that is the global
financial system. It is a house of cards built
on debt.
The ‘fractional reserve’ banking system used by
governments, central banks and financial institutions
across the globe means that money is no longer backed
up by gold reserves, it is simply “created” through a
“deposit entry” which is based on a borrower’s “promise
to pay” the loan back over time, and involves no actual
deposit anywhere or at any time. So, the banks do
not actually lend out money they already possess, but
rather “create” the money loaned to borrowers through
electronic book entries based solely on the borrower’s
“promise to pay”. In simple terms, “money” is created
through debt.
Given the staggering amount of debt created in this
way and the mammoth, unsustainable interest burden
it creates, it is not surprising that financial institutions
around the world are perched on the edge of financial
collapse – an outcome that is not unlikely, given the
number of banks that have already failed or had to be
bailed out.
Everyone is acutely aware of what happened to the
US financial system and the global economy when
Lehm