Banking 8: Reserve Ratios

How reserve requirements limit how much lending a bank can do.

Category:

Education

Tags:

• reserve
• requirement
• banking

[luke2468013579]

so have they printed more money than they have in gold?...thus are able to lend more than reserves?

[antsy9000]

there is no gold, its all credits now. watch the fractional reserve video in this series.

[diratoba]

Instead of 500/700 shouldnt it be 200/400?? Since the bank doesnt have the 300 they already gave to C????

[manofbusiness91]

@ParaKnox90 same thing could be said bout the stock market, individuals have a me proirity so its just not the way things work

[MrPEDOCTOR]

Thanks for the video.

[ParaKnox90]

If they taught people that removing money out the bank all at once is bad... people wouldn't do it and therefore banks don't get bank run?

[LuqmanNaq]

@clray123 "unless your standpoint is that there are absolutely no worthwhile projects left to be done in this big world" If businesses, gov's, individuals and banks are simultaneously encumbered with too much debt, assets depreciating and begin deleveraging then credit contracts. It begins a deflationary collapse (that's what happened in '08). What's keeping things limping along is the trillions that have been pumped into the global system but that too will fail. Also cheap oil is gone

[IvanAndreevich]

@clray123 Fair enough. I know the difference, I misspoke.

[clray123]

@LuqmanNaq As for the "system collapsing", the only thing I can see is hiccups caused by banks abandoning due dilligence (in mistaken hope of externalizing risks) and pumping money into many worthless projects over the past few years (housing bubble in US, mad EU subsidies for corrupt countries). It doesn't mean that really worthwhile projects don't exist, just that the incentives for funding them have been temporarily disabled, but as we see the system is smart enough to correct such idiocy.

[clray123]

@LuqmanNaq The current system requires neither "exponential growth" nor does it require a "constant expansion of debt". These are confused ideas spread by Zeitgeist and co. In fact the money (debt) amount in the system can be easily shrunk in face of declines in productivity. However, unless your standpoint is that there are absolutely no worthwhile projects left to be done in this big world (commit suicide then), there is little reason to be concerned about an insufficient growth potential.

[LuqmanNaq]

@clray123 There was only so long we could base our economic system on the constant expansion of debt before it began to collapse and we reached that point in '07-'08. To stubbornly defend a collapsing system is irrational. How is a economic/monetary system based on exponential growth in a finite world sustainable? How can you defend a system that requires the constant expansion of debt to remain solvent? A steady state economy is the only rational system. /watch?v=Q5dDQQ76zTc