Oh please why does this take soooo many words. Banks make lots of money because they print imaginary money.
In economics at school we learned about money multipliers where notes would circulate a particular economy a number of times. So if the reserve bank printed £1 billion and the multiplier was five the economy had chewed through £5 billion worth of transactions in a year.
Bankers do a similar thing. They hold on reserve (depending on the country) £1 for between every £8-£20 pounds they lend believing no more than £1 in £8-£20 of their deposits will ever need to be withdrawn at any one time.
So every time you deposit £1 at 2% interest they might loan that £1 out up to 12 times at 3% interest. They get 60p and only pay 2p. They might see a few partial defaults but rarely a complete one (which is the credit crunch all over).
So now they’ve made say 40% profit they can afford a large bonus. Ipso facto duh!
Good on them, more fool you.
