Demonstration: Fractional Reserve Banking

a) There is no monetary expansion; no "multiplier effect". The SAME money is simply moving around over time (the same thing that happens when 5 successive people spend the same $20 bill.

b) When the bank lends out money, it no longer has that money.

c) No money is EVER in two places at once.

Category:

Education

Tags:

• fractional
• reserve
• banking
• demonstration
• how
• does
• work

[Cailwyn]

Mrs. PowerBar is a Transsexual whore...

[dpariet]

Your logic or understanding in this is missing and important aspect of banking today. You forgot to mention Mr. Clean.(FDIC) So when the bank of Aeon Flux makes "risky" loans that can't be repaid and the reserves are depleted Mr. Clean comes in and does what he is made to do and cleans up the banks mess. He "bails out the bank" and allows the bank to pay back its depositors. So now, where does Mr. Clean get this money? From the government(FED) which are loans basically from the taxpayer.

[BillWilliamsonSr]

I tried this at school and got my ass kicked.

[dpariet]

Your logic or understanding in this is missing and important aspect of banking today. You forgot to mention Mr. Clean.(FDIC) So when the bank of Aeon Flux makes "risky" loans that can't be repaid and the reserves are depleted Mr. Clean comes in and does what he is made to do and cleans up the banks mess. He "bails out the bank" and allows the bank to pay back its depositors. So now, where does Mr. Clean get this money? From the government(FED) which are loans basically from the taxpayer

[dpariet]

Your logic or understanding in this is missing and important aspect of banking today. You forgot to mention Mr. Clean.(FDIC) So when the bank of Aeon Flux makes "risky" loans that can't be repaid and the reserves are depleted Mr. Clean comes in and does what he is supposed to do and cleans up the banks mess. He "bails out the bank" and allows the bank to pay back its depositors. So now, where does Mr. Clean get this money? From the government(FED) which are loans basically from the taxpayer

[D4Shawn]

If he were to actually explain the process, I'm sure I could easily explain flaws in his logic.

Most likely, this is the fallacy he's committing:

watch?v=Mi0xXmjnPgc

Like most people, he is confusing velocity with quantity.

It's actually a really obvious fallacy. I don't know why people have such a hard time understanding it.

[TheUncleBastard]

I recently read a transcript of a telephone conversation with a Mr. Ron Supinski, of the Public Information Department of the San Francisco Federal Reserve Bank.

Mr. Supinski states that $7 can be created from every $1 deposited in a fed member bank.

Google: Phone Call To The Fed Dan Benham

[D4Shawn]

That's not how it works. That's a conspiracy theory.

"Reserve requirements are the PORTION OF DEPOSITS that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank"

[TheUncleBastard]

what if instead of holding 10 cents in reserve and loaning out 90 cents, the bank chose to hold the whole dollar in reserve and then loan out 9 dollars?

[HurricaneHeidi]

Demand for goods and services affects the purchasing power of the dollar. When credit flows freely, more people feel capable of purchasing more stuff, and prices rise in response to this increased demand. When people perceive that they are buried in debt, and barely able to pay their ordinary bills, and may lose their homes, demand (especially for non-essential goods and services) decreases, and so prices fall, thereby temporarily increasing the purchasing power of the dollar.