If asked a question: 'How is money created?' - would you know the answer? Not many people would. Some say, that only 1 in 100 can provide a correct response, regardless of their educational background. Creation of Bank of England by Scott William Patterson in 1694, set the foundations for today's modern banking system, including the Federal Reserve in US. Film by Corbertt Report 'Century of Enslavement: The History of The Federal Reserve' explains it all, in a very painful detail. A 'must see' for all that want to understand why banks are so keen to lend us money, to keep the economy going.
OK, but if you haven't got 90 minutes to watch the video (yes, we are all very busy people lately), here is how it works in a nutshell: you go to the bank and deposit 100 bucks. You now have 100 dollars in your savings account. But then, next day you need some of your money back to buy food, but want to keep your savings deposit untouched, so you decide to borrow from your bank. Bank is required to keep only 10% of your deposit and can lend out 90 USD (out of your 100 USD) to anyone including you. The bank manager tells you that you can borrow 90 USD from them. You sign a loan agreement and then you are handed 90 dollars. You now have 90 USD in cash and 100 USD in your savings account. No other money has been used by you or the bank. Out of your 100 bucks, 90 new dollars have been just created completely out of thin air! And this process may be repeated multiple times, with no new money injected into the system (provided you do not touch your deposit). Ingenious isn't it?
Of course, you now have to work (or generate value via some other means) in order to repay the loan back to the bank including interest. The bank just needs a small steady inflation going, to make handsome profit from the loan agreement signed with you. But for that, there is a government agency, like the Fed in US.
If you want to know the link between Bank of England and the Fed, you have to watch the video - there is no easy shortcut.
