The Startling Truth about Money and Debt by Robert Kiyosaki

The Startling Truth about Money and Debt by Robert Kiyosaki

The concept that "money comes from debt" is based on the way modern fiat money systems operate. In such systems, money is not backed by a physical commodity (like gold) but instead derives its value from the trust and confidence people have in the currency and the government that issues it.

Central Bank: In most countries, the central bank is responsible for monetary policy. It is the institution that controls the money supply and interest rates. When the government or banks need more money in circulation, they turn to the central bank.

Government Debt: The government issues debt in the form of bonds, treasury bills, or other securities. These are essentially IOUs that the government sells to investors and institutions. Buyers of these securities lend money to the government with the promise of receiving interest over time and getting their principal back when the bonds mature.

Bond Purchases: The central bank, through a process called open market operations, buys some of these government-issued securities from the open market. This puts money into the banking system and provides the government with the funds it needs.

Bank Lending: Commercial banks can also create money through the process of fractional reserve banking. When you deposit money in a bank, the bank is required to keep only a fraction of those deposits as reserves (a reserve requirement) and can lend out the rest to borrowers. This creates new money in the economy.

Loans and Credit: When banks make loans to individuals or businesses, they are essentially creating new money by adding the loan amount to the borrower's account. This money is "created" out of thin air, as it represents new debt in the system.

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