Biblical Law and Government

Lesson Nine - Page 8

An accurate understanding of the money system is also hidden by the common belief that commer cial banks are just like Credit Unions and Savings & Loans. When a Savings & Loan association, an insur ance company, or a Credit Union makes a loan, it lends the very dollar that its customers have previously paid in. Here is how they do business. For example, in a credit union: 1. Members deposit their savings. The Credit Union pays interest on the savings. 2. The Credit Union loans out the member’s savings at a higher rate of interest. Very simply, the dif ference between the rate paid and the rate charged is their gross profit.

SAVINGS of members:

LOANS to members:

$25,000.

$20,000. in loans $5,000. cash on hand

Liabilities $25,000. (Owed to members)

Assets $25,000.

(Vault cash and money owed to the credit Union)

If the above Credit Union charged 15% interest on the loans, they would collect $3,000 in interest. If the above Credit Union pays 5% interest on savings then they would pay $1,250 in interest to members. The Credit Union’s gross profit would be $1,750. ($3,000 - $1,250 = $1,750) The $5,000 cash on hand would be used as a reserve to pay any member wishing to make a withdrawal from his savings account.

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Ten Commandments Bible Law Course Sovereignty Education and Defense Ministry (SEDM), http://sedm.org