The primary reason which explains why this business exists is to create money. Additional money is created with debt. You as a person can lend USD$200 to a pal, and you can draw up a written contract such that the interest for that loan is ten percent. If the terms are agreed to, your pal must pay you back USD$220. What has happened is that an additional $20 has been put into circulation, although you do not see the cash again until the loan is paid back, and the interest has been paid as well.

Now, banks are doing this everyday, but with much more money. Banks have the power to create cash out of nothing. Since banking programmes involve trading with discounted bank issued debt instruments, money is made by the fact that such instruments are deferred payment needs or, in other words, a liability. Cash is created out of debt.

In practical terms, anyone can issue debt notes.

Debt notes are deferred payment liabilities, as we have just shown. For example: A person requires USD$200, so he writes a debt instrument, or a "note," for USD$220, that matures in two years, which he then sells for USD$200, which is known as discounting. Allegedly, this issuer is in a legal position to issue as many notes at whatever face value he would like, so long as debtors believe he is financially sound enough to honour them upon maturity. Thus, potential debtors would have an interest in purchasing such notes, e.g. medium-terms notes (MTN's), or other discounted bonds. These are issued at reduced prices by major world banks in great quantities of billions of dollars per day. Bank guarantees (BG's), or stand-by letters of credit (SBLC's), are not debt instruments and would not be used in any banking program.

Generally speaking, they do create such notes out of thin air, and only have to pen the signed documents. That is, loans are made simply as bookkeeping entries, by ink or by computer. It does not matter whether the actual currency is in the vault or not, as long as there is not a run on the bank, which is a risk that all creditors take.

It's straightforward that you, as a person, could write a debt note. Now, the core problem: To distribute such a note is simple, but the creditor would have problems in finding a customer, unless a potential debtor (the customer) believes the creditor is financially sound enough to respect the note on maturity. Any bank can issue such a note, sell it at a discount, and guarantee to repay the full face value at the time the note matures. But would that issuing bank be in a position to find a debtor for such a note without being financially sound enough? For example: If you had a million dollars, and had the chance to obtain a debt note with a face value of one million dollars issued by one of the biggest banks in western Europe for, let's say $750,000, a note that matures in one year, would you not then think about purchasing it if you had the opportunity to confirm it?

If someone approached you within the secondary market and asks if you'd like to buy a matching debt note issued by an unknown bank, would you consider that offer? As you can see, it is a matter of trust and credibility only. Now, perhaps, you'll also see why there's so much crime, and so many fraudulent instruments in this business. Scammers know they can make a great deal of money with a fake instrument, if they can find someone foolish enough to give money to them for such an instrument.