“Money is created when banks make loans.”
Most of the time this is a correct statement, when you account for the entire cycle of creating money described above. A (highly theoretical) exception would be if a loan came from a time deposit (like a CD). Check out Part 2 which goes into deposit reclassification. Again, keep in mind the money creation takes place by the banks cycling the money around the economy, and also from the FED itself.

“Please do the full accounting entries to illustrate the whole process and assume that all the loans are paid back in full.”
I would if I had the time to show you Instead just read the “Loan Banking” section here from page 33/164 onwards. http://mises.org/books/fed.pdf
However, I’ll caution you that all loans can never be paid back in full because paying them back with the interest requires more paper dollars than currently exist. Once the borrower has spent the dollars, those dollars circulate btw banks and the money supply grows, roughly per the mechanism I wrote about above.

“Banks make money on interest only. What you’re saying though is that banks make money on interest as well as the entire loan amount.”
Not exactly. Yes banks turn a “profit” not just from interest but sometimes also from “loaning up.” However, it is certainly possible for individual banks to collapse from loaning out too much too poorly. The purpose of the FED is to bailout individual banks, which are part of the money-production cartel, if needed to keep the system afloat. Since the FED can print money, the only type of economic collapse the system is prone to is a massive systematic one, instead of smaller failures.

“In other words, bank profit = principal + interest.”
No, as I tried to explain above. Reading the entire book “The Case Against the FED” should clarify things more http://mises.org/books/fed.pdf

When a bank lends $500,000 at X interest % to someone for buying a house then when the loan is paid back, but still (falsely) claims to investors that it has the $500,000 in deposits they gave them, yes profit is made from the “interest.” However, more currency (and therefore more chances to “loan” out money) is created in the banking system by the loan.

Now, reality is that the banks are also investment firms, so they also leverage up on their “assets” – which are typically just debt.

Hopefully what I wrote helps, there are a bunch of article referenced off of this page that might assist you as well. http://towneforcongress.com/platform-issues/federal-reserve/

That cannot be the case.For example, when a bank lends $500,000 at 5% to someone for buying a house then when the loan is paid back, say, in 15 years, that bank makes

bank’s profit = $500,000 + 375,000 = $875,000 (simple interest calc).
Does this make sense to you?

Thanks,

Cameron

“So what happens to the $900 returned by the borrowers? Who owns them?”
Well, the $900 spent by the borrowers went into the economy for the purchase of goods, etc. If (another) $900 is paid back to the bank in full by the borrower, then banks owns the $900.

Examples of this are all over the net and almost all of them never continue and follow up on what happens when those loans are paid back. Will those banks make $900 + interest? (assuming all borrowers payback.
No banks make their profit from interest. So what happens to the $900 returned by the borrowers? Who owns them?

I have recently launched a new website on social credit. see link http://www.bleedingindebt.com

I would like to share this link with others to help educate this very important subject on the creation of money or rather the froudulent practice the banks use to create new money as debt.

The video link below is the best
I have seen in explaining this. Maybe you can use it on your site.

http://www.bleedingindebt.com/how-the-banks-create-money.html

Kind Regards,
Andrew Webb