How does credit work?
97% of the money you use every day was not printed by any government: it was created by a commercial bank when approving a loan. This workshop takes you step-by-step from the myth that "the bank lends what people save" to understanding why your mortgage is easy to approve, why your business loan is not, and what you can do with this information in your own finances.
Before you start
This workshop is not armchair economic theory. It is the actual mechanics—documented by central banks and researchers like Professor Richard Werner—behind every loan, every mortgage, and every interest rate you will sign for in your life. Understanding it changes how you negotiate a loan, how you value real estate, and how you decide what to invest the money you borrow in.
How money is created
97% of the money supply is born as an accounting entry in a commercial bank, not as a bill printed by the government.
Why credit is selective
Banks do not distribute credit evenly: they prefer to finance existing assets (houses) over new production (businesses).
What to do with this
How to use credit to your advantage once you understand the real rules of the game, instead of the ones "we all believe".
Before watching module 1, write in one sentence: where do you currently think the money a bank lends you comes from? Read it again when you finish the workshop.
The system that no one explained to you
84% of people believe that money is created by the government. Almost all of us are wrong — and that confusion costs you real money every time you take out a loan, compare a rate, or decide to buy a house.
Why this affects you directly
Your mortgage
It is approved quickly because the bank does not risk "saved" capital: it creates it upon signing, and it also keeps the house as collateral.
Your business
A loan for an SME is reviewed for weeks and rejected more often: for the bank, it is riskier even if the amount is smaller.
The price of your house
If easy credit is directed toward buying existing assets, the price of those assets rises — not because they are worth more, but because there is more credit competing for them.
The experiment that proved it
In 2014, professor Richard Werner did what no researcher had done before: he took out a real loan from a German bank and documented step-by-step the exact accounting moment when the money appeared. Shortly after, the Bank of England confirmed the same mechanism in an official document: commercial banks create new money every time they grant a loan. They do not move existing money from one place to another: they generate it.
Think about the last loan you requested (credit card, car, mortgage, business). How quickly was it approved and what collateral did they ask for? Write it down — you will compare it later in the workshop.
The mirage of the money multiplier
Almost all of us learned—without anyone explicitly teaching us—that a bank lends the money that others saved. That story is comfortable, intuitive... and it is not how the real system works.
Popular belief
You deposit $1,000. The bank keeps a reserve (e.g., 10%) and lends the rest ($900) to another person. That person deposits it and the cycle repeats, "multiplying" the original money little by little from real savings.
What central banks document
The bank does not wait for your savings to lend. When it approves a loan, it simultaneously writes a debt (what you owe it) and a deposit (what you can spend) at the same instant. No money comes out of any vault: it is typed on a screen.
The difference in one sentence
How many times had you heard the "multiplier" version (bank lends what others saved) before this workshop? Where did you hear it — school, family, social media?
The exact moment of creation
Every loan is born in a single accounting operation: asset and liability appear together, in the same second, out of thin air. Understanding this moment is the key to the entire workshop.
The loan as an "imaginary car"
Approval
The "principal" (for example $10,000) is created out of thin air upon signing. It is imaginary money that you can now spend as if it were real — and in fact, it already is.
Monthly payments
You pay the principal plus interest with the real time and effort of your work. That effort is completely real, even though the original money was not.
Debt settled
The principal is destroyed accounting-wise upon payment — the same type of entry that created it, erases it. Interest, on the other hand, remains as the bank's real and immutable profit.
This is the part that almost no one explains: the only value that does not disappear in the entire process is the interest that the bank retains. Capital is born and dies in the accounting system; interest is the genuine profit that remains outside of that cycle.
Take a real loan you have (credit card, car, mortgage, business). Write down: original amount, total interest you will pay if you pay off in full, and what percentage of the total paid is just interest.
The risk bias: mortgages vs. small businesses
If banks can create money practically out of thin air, the only real limit is who they decide to lend it to. And that decision is not neutral.
The mega-bank problem
For a large bank, the administrative effort of approving a $50,000 loan for a bakery is almost identical to that of approving a $50 million corporate loan — but the latter pays a thousand times more. The result: large banks systematically ignore SMEs, even though they generate the majority of jobs in economies like the Mexican one.
Red route
Easy credit buys houses and already existing assets. No new jobs, no factories: just higher prices for everyone.
Green route
Credit directed toward production finances equipment, employees, and new technology. The real economy grows.
As a business consultant (Help Desk, Legal and Tax, Integral Transformation), how does your way of advising an SME client change knowing that the banking risk bias is against them by the system's design?
More bills, same houses
The reason why you need to work twice as hard today to buy half as much is not just a lack of supply, migration, or foreign investors. The root is a system designed to inject almost infinite credit into a market of finite goods.
The easy credit funnel
Imagine a funnel: easy and growing bank credit enters from the top; at the bottom, the number of available houses barely changes. The result cannot be anything other than rising prices — not because houses are improving, but because there is more money (credit) competing for the same number of goods.
This does not mean that housing is a "bad investment" — it means that understanding the mechanism allows you to decide with more judgment when and how to enter that market, instead of assuming that prices rise simply because "that's how the economy is".
If you are evaluating a property for your real estate project (for example, distressed assets), how does your analysis of "fair price" change knowing that a good part of the market valuation responds to the availability of credit and not just the physical value of the property?
Two paths for new money
The same million pesos created by a bank can take two radically different paths — and the result in the real economy depends entirely on which one the system chooses.
Red path: existing house
$1,000,000 → buying an existing house → the seller gets rich. No new factory, no jobs created. Just more expensive houses for everyone else.
Green route: small business
$1,000,000 → buying equipment and hiring → 10 new jobs, new technology, real production. The economy truly grows.
The decentralized model: the case of China (1978)
Deng Xiaoping travels to Japan
He studies the Japanese postwar "economic miracle" closely before redesigning the Chinese financial system.
Thousands of local banks, not one central bank controlling everything
Instead of concentrating credit decisions in a few giant institutions, thousands of town and regional banks are founded.
Bankers who know their clients by name
That meant loans directed toward real production. The result: four decades of sustained growth and the largest poverty alleviation documented in modern history.
The core idea for CMA+F
Supporting small, local banks — or, on a personal level, directing your own credit toward productive projects instead of just existing assets — boosts the real economy and creates genuine jobs. The decision of "who to lend to" is, at its core, a decision about what kind of economy we want to build.
Think about your current projects (consulting, real estate, NómadaBase). If you had to finance one with credit today, would you choose the "red route" or the "green route"? Why?
Apply it to your life and your business
Understanding the mechanics of credit is not just a fun fact: it is a decision-making tool. This is what you can do differently starting today.
Negotiate knowing what you know
The bank is not "lending its savings at risk": it is creating the money at that moment. That gives you room to negotiate terms, fees, and conditions with more confidence.
Use credit to produce, not just to buy
Before taking on debt to acquire an existing asset, ask yourself if that debt could also finance something that generates new income or value.
Interest is the only thing that doesn't disappear
When evaluating a loan, focus on the total interest cost, not just the monthly payment: that is the true cost of the system for you.
Consider local or alternative banking
Smaller institutions usually know your project better and are more willing to finance real production, not just low-risk assets.
Checklist before your next loan
Calculate the total interest, not just the monthly payment
Ask the bank for the breakdown of total interest paid if you pay off the loan at full term.
Ask what collateral backs the loan
Understanding the bank's real risk gives you negotiation power over rates and conditions.
Evaluate if the credit buys an asset or finances production
Both are valid, but it is better to decide consciously, not by default.
Compare at least one small or alternative banking option
It doesn't always win, but it's worth having the comparison.
Write down a concrete credit or financing decision you will make differently starting today, applying what you learned in this workshop.
Summary and roadmap
We cannot change a system we do not understand. You have already taken the first step: understanding it. This is what you are taking away.
What you covered
The system that no one explained to you
Money is not created by the government: it is created by commercial banks when they approve loans.
The myth of deposits
Banks do not need your savings to lend; credit is created, not redistributed.
The exact moment of creation
Asset and liability are born together; interest is the only profit that is not destroyed.
The risk bias
Mortgages are approved more easily than SME loans, even though the latter generate more employment.
More bills, same houses
Easy credit directed at existing assets is the true root of real estate inflation.
Two paths for new money
The same credit can either inflate prices (red route) or generate real production (green route).
Apply it to your life and your business
A concrete checklist for your next financing decision.
Follow your path in Finance within CMA+F
Money without taboos
Your first honest conversation with your personal finances.
Invest for the first time
Take your first steps in investing without financial jargon.
Real estate for beginners
Practical guide for the Mexican market, with what you already know about credit.
"If banks can create money out of thin air, the only real limit is who they decide to lend it to."