‘The function of a Central Bank, regardless of which country, is to “launder money” – to transform it from worthless paper into valuable capital through the labor of the people that borrow money and then repay the amount (principal and interest). It’s the act of repaying that breathes life into otherwise empty and valueless currency.
The money that is lent out is generated as electronic “virtual” currency – which is created inside computer programs used by the banks to record and account for these funds. Before this “virtual” currency is lent, it resides inside the banks computer accounting system as ephemeral digits – sometimes existing for only a few milliseconds before being transferred into the hands of the borrower. The borrower usually never sees any physical form of payment – the borrowed funds are transferred into the borrower’s account as electronic digits – giving the borrower the credit means to settle a transaction – usually a purchase of goods or services. The borrower must then find another source of cash – usually through some act of value-producing labor – to payback the loan to the bank. But the money that is being returned to the bank now has “real” value – not merely “virtual” value.’