Most of the money is an imaginary pipedream...magically created through lending.

Example: Bank actually has only $3 million in cash. They lend it out 10 times...it becomes $30 million lent out and $3 million in actual cash = $33 million all told, but $30 million of it is totally fictional...because the government never printed it or minted it!

Step 2 - the $30 million of fictional dollars that were lent out by the bank all get deposited into various banks and those banks lend it all out 10 more times. You now have another $300 million out there that appeared magically and was never printed or minted by the government. It doesn't exist in coins or bills...it just exists as a digital record or a total written on a balance sheet.

This generates one heck of a lot of spending by the people all that money was lent to and they get themselves into one heck of a lot of debt! But the economy grows rapidly...whoopee! Business is good.

There is now $330 million in circulation (on computer screens), but only the original $3 million is real money that the government minted or printed. (they mint or print some more every year, but all the money they mint or print equals less than 5% of the money on the books...that suffices to give people enough cash to carry around in their wallets on a daily basis)

The banks are now making one heck of a lot of profit on all the interest they are charging to people for lending them $330 million! It's like a money tree.

step 3: The banks collectively now have $330 million in assets (created through putting other people into debt and collecting interest on that debt). They lend that $330 million out ten more times! And the gravy train rolls on!!!!!!!! Plus there's all the interest charges...those create even more fictional money that appears as bank assets. Figure they've got about $400 million by now.

This is better than a money tree! It's like having the Midas Touch.

many steps later: Having created absolutely unbelievable amounts of fictional money and having encouraged millions of people to get themselves massively into debt, the banks finally drive the situation so far out of reality that a large number of their debtors are unable to pay even the interest payments, let alone pay back the principle!

Many people default on their loans. Lives are ruined. Houses are lost. Businesses fail. The banks start to go broke too because so many of the debtors have defaulted. The money ain't worth shit any more. The shit hits the fan.

It all happened for one simple reason: Since about 300 years ago, starting in England, bankers were allowed to lend out vast amounts of money that the government itself never created and which was in fact imaginary money. Money created by the stroke of a pen or a computer key, out of thin air. It resulted in an unpredented expansion in the economy, accompanied by an unpredented rise in debts, personal and national.

It was a pyramid scheme. A very big one. Like all such schemes, the bubble finally bursts one day...and there's almost nothing real there when it does.

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And then people have to start over.

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Governments should never have allowed banks to lend out more than they could back up with actual REAL cash on deposit...I mean REAL physical money or gold or silver that was sitting in their vaults. When governments allowed banks to create new fiat money from nothing at all, they destroyed any real control over the value of money and they gave the financial system up to crooks and gamblers.

They are now trying to bail out the biggest of those crooks and gamblers, but what about the rest of us?

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And the hilarious thing is...there's still a real world out there in spite of it all. We still have real crops, real products, real industries, real people...all of which is being imperilled by a totally irresponsible financial system that is itself out of touch with reality.