Fractional Reserve Banking requires a Business Cycle

- The cost of Fractional Reserve Banking.
- The need for a Business Cycle / Recession
- Credit growth drives the monetary growth.
- The multiplier effect of Fractional Reserve Banking.

Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all deposits immediately upon demand.

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Videos on how banks work and how money is created, the workings of central banks and their effects on the money supply, inflation and/or deflation.
http://www.youtube.com/view_play_list?p=CECDA315A8848B99&page=1


Karl Denninger - The Market Ticker
http://market-ticker.org/


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Category:

Education

Tags:

• TickerGuy
• Karl
• Denninger
• Fractional
• Reserve
• Banking
• Business
• Cycles
• Credit
• growth
• drives
• monetary
• multiplier
• effect

[zefvor]

Economy based on ever expanding levels of debt is not sustainable. We need to completely rewrite rules of the system

[affiliate30]

This economists want to use critical thinking to explain some stupidity that doesn't need critical thinking explanation. You lend more money than you have to make more money than you lend, you have to print money or trick investors into thinking they are getting paid, while what you have going is nothing more than a pyramid scheme. That's because money is good and bad for the economy at the same time, money is linked to products and services by force to speed things up, and create power

[PositiveMoneyUK]

A biggest public campaign has started to abolish fractional reserve system. Visit POSITIVE MONEY website and support the campaign.

[casimirpyahoocom]

Its a lifestyle decision most people don't realize has been made for them. Fractional reserve is like the drug user who craves the extreme highs and lows while an honest system is like the even keeled sober person. Neither is right or wrong except that there isn't really informed consent for most people who don't realize they are living the druggy lifestyle with their money.

[SexyMelon]

@bad4ever2001 (Haha, apparently I can't read, sorry for describing what a bank run is...)

And yes, to put it more concisely, correct.

I'd say don't trust me because I'm no economist, but it's not like modern economics isn't just applied demagoguery without any scientific backbone.

[SexyMelon]

@bad4ever2001 Bank credit. This may be transformed into common paper money because paper money is constantly being printed, but most of the money today is, indeed, just bank credit: electronical, or existing as written loan or obligation.

The issue you're describing is called a "bank run", and it is indeed one thing that can bring such a system down. It's usually solved by having a large central bank give out paper money to smaller banks to cover-up the lack of physical money/gold.

[bad4ever2001]

@SexyMelon Is this the case where there is no physical money in its vault only electronic money that is fractionally reserved or loaned? The danger from bank runs is that people will ask for the money in cash which is not readily available. Hence the limitation as to how much one can withdraw within a certain time period. Am I correct with this statement?

[nazirdjon]

@zefvor that's Islamic bank. no usury, and fairness in business transactions. /wiki/Islamic_banking

[Lingerfoot]

@zefvor - How is our economy based on ever expanding levels of debt and why is it not sustainable? I still don't understand what you mean by that statement. Peace.