Help me understand fractional-reserve banking.
Let's say, for sake of example, that a bank is legally required to have a 10% reserve. If I deposit $1,000 with the bank does that mean:
a) The bank can now lend out another $900 (subtracted from my deposit with the remaining $100 being considered the 10% reserve)
b) The bank can now lend out another $9,000 (by considering my entire $1,000 deposit the 10% reserve)
c) I don't know I'm just here to shill shitcoins
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b
The frogger bank run is going to be fun times
There is absolutely no difference in principle between your a and b
The bank takes your $1000.
The bank can now lend out $10,000, with your original 1000 as the reserve.
If any of that $1000 then finds its way into their deposits, they can repeat the whole process again.
Fractional reserve banking is a meme, the real issues that plague our economy are QE on fiat, ie inflation and a lack of a gold standard, and the crippling amount of debt the politicians have put us into.
b. The bank can loan out n*9 dollars where n is the actual amount of dollars in reserve.
>Fractional reserve banking is a meme, the real issues that plague our economy are QE on fiat, ie inflation and a lack of a gold standard, and the crippling amount of debt the politicians have put us into.
If the government could print their own money there would be only inflation. With FED loaning the moeny there is inflation AND debt.
So how is that $9,000 created? If I myself were the "bank" in the situation I couldn't physically lend out that much.
When is the last time you used physical cash in any appreciable amount you idiot? almost all money is just a number on a screen, the bank can loan that out at will
wrong you fucking brainlets. Probably 49 IQ. Banks can lend 90% or $900 of your $1000 deposit and are allowed to reserve just 10% of it.
lel I understand you must be working really hard to try to think this through, but the two options are equivalent
- reserve $100 of the deposit, lend $900 of your money
- reserve your entire $1000 deposit and lend $9000 additional money that they don't have
Either way they are holding 10% of their loan
Easy
It's $900 they will lend. They charge interest on the amount they lend out.
This is a big reason for banks collapsing during the GFC, People withdraw their money, suddenly their reserves are all gone. More people try to withdraw money and panic ensues.
Banks also lend to other banks, when all lending freezes as all banks have no funds people can't get paid and the banks go massively into debt. People default on their loans and the banks simply can't recover the cash.
option b is out of the question. This would drive inflation through the roof as high as OP’s autism levels
9000=900 (You)
kys
How the fuck does a bank lend money they don't have you moron?
The answer is a OP.
Btw, the cycle continues as the 900 is deposited elsewhere, and then 90% is lent out, repeat ad infinitum.
Xrp
none.
Banks loan as much as they deem reasonable and then capture deposits to meet the fractional reserve requirements.
sauce: Bank of England.
Look it up.
Option A
Source: actual banker
I think it works like this.
You deposit $1000
Bank loans out $900
The guy who got the loan from the bank buys a car. The guy who sold the car puts $900 in the bank
Bank loans out $810
The guy who got the loan buys a boat. The guy who sold the boat deposits $810 in the bank.
Bank loans out $729.
Now that I think of it, the bank always has $1000 when they deposit the money back into the bank(+ they get interest from all the loans). Gets my nog jogging.
everytime i start informing the public on this scam all i hear is screams.
literal it can be explained in a paragraph, you know when you open a notepad and type in numbers? now imagine that but moving those numbers around in different names and because the government has control aka they can kill you then the people dont question shit and they consider it valuable, so money works cause the people have faith in it.
now the big thing everyone seems to miss is where does the energy come from to support the money exchanges.
it comes from your kids, they will be under their spell, then it keeps on going on and on its truly a flawed system designed to scam the public. literally the government are con artists.
This is confusing, but I think you're right.
So then, what do central banks do under this model? And how do they do it?
HOW DO THEY LOAN MONEY THEY DONT HAVE
they don't give a shit about your $1000 user. what they are lending out are fractions of the their loans from Federal Reserve banks.
In my country the correct answer is b. But the amount is 99,000 euros (1% reserve). They just create the loans out of thin air and the new money is destroyed when the lenders pay back the principal (they just keep the interests).
in your scenario lets say the bank has 1,000 euros and now lends out 99,000 to someone buying a house.
how does the person who sold the house get their 99,000 into their bank if it didn't exist in the first place at the other bank?
Because we stopped making it illegal but only for them.
Where is that extra money coming from you brainlet? Lol
see
you're acting like they lend out dollar bills or something. money isn't physical user, it's digits on a computer screen. the act of loaning it out is what creates it. this is actually what happens.
Banks can’t just press a button and create money you retard. Look up how it actually works before posting this misinformation
so basically, for every physical dollar bill, there are potentially 9 digital dollars on loan.
wait so they just create that money wow it just made sense to me
I have. banks are required to hold 10% reserve. So a federal reserve bank lends then $100M, they can now lend out $1B. That $1B is new money....it didn't exist before the federal reserve loaned them $100M
Yes that exactly what theyve been doing since forever. Like literally google it, you have to be slow in the head not to understand they are scamming you right infront of your face.
thats how it works when they loan you 100k for your house they just made that 100k up and now you owe them 100k
>This would drive inflation through the roof
>looks at graph of housing prices over the long term
>looks at graph of healthcare prices over the long term
>looks at graph of education prices over the long term
>looks at prices of anything with price inelastic quantity of demand i.e. essential needs
>inflation isn't through the roof already
oh no no no
oh no no no no
it's a crazy system that gets crazier the more you think about it. every dollar is a debt to the federal reserve.
so the federal reserve prints money, then a federal reserve bank loans that money out to an ordinary bank. that's a load and it's subject to interest. that means that there isn't even enough dollars in the system to pay back the original loan amount. so banks lend out that money, holding 10% in reserve.....profit. but that just moves the debt out to a further level of abstraction. debt based economy. debt = wealth friends.
Its ridiculous when bankers call crypto a ponzi when it is based on actual ownership. In our current system it is impossible for everyone to be debt free, the amount of debt will always exceed the supply of money. That's a true ponzi because it requires us to keep moving and shuffling around our debts or the whole thing collapses
A. because we assume that your deposit is all the bank has.
You also have money multiplier effects based on the reserve ratio(RR)
I think its 1/RR = m
And m*initial deposit = money that is usable in the fractional reserve system.
The smaller RR is, the more money is "made" as you can lend more.
Double check this but I think it is more or less correct. More correct than meme answers of hurr fiat hurr anyways.
its how to enslave a country because the whole country is indebted to the central owner
It is several A in cascade (new deposit of the borrower) leading to B. That has been explain by an user earlier and re explain in the link I posted above
I seriously wonder when your guys are going to start shorting your own national debt, that they put most of your country in. Gonna be hilarious.
this is not a US problem. almost every central bank in every country on the planet is indebted to the federal reserve at this point.
Why is she taking off her underwear?
to pay off her debt. your next
No way, cause then there wouldn't be inflation. It goes like this
Deposit $1000
Bank uses that as reserve to lend $10000
Loan recipient deposits that $10,000
Bank uses that as reserve to lend $100,000
That's why the dollar is worthless.
Somehow the FED governs through interest rates how often that happens, but that's how it works.
What I want to know is If the US owes interest on dollars, how does digital money effect that? Is the dollar treated like a token with a paper representative and interest is due on that? Or is it only paper money?
What happens if 20% of all customers want to withdraw their deposits???
or is she putting them on???
bank says no.
But it's not their money...
It is. They're owners of your money. Technically they have *obligation* to return it to you but they may legally refuse to do it in some cases.
not your keys, not your coins.
The more people get fully behind how banks and finance operates the earlier someone will get hanged I assume.
that's why common peasants shouldn't know these things and won't learn finance related stuff anymore in school.
In Russia bank representatives visit schools to promote their products (loans).
you don't know shit about how fractional reserve works, kill yourself
no...that is not how it works.
You put in $1000, they can loan $10,000
Nowhere. That's the beauty of it. They create it. I can see that this subject is somehow new to you but do some reading and you will see that the anons are right and that's how it works.
Look what happened on Greece a couple years back when they had a mini bank rin- government had to step in and put a stop to it or the entire ponzi would fall apart.
The yellow vests in France are trying to manufacture the ring on banks, we will see if they suceed, but if they do then the government will step in and do what they did in Greece. There's a reason why so many people advocate keeping your money somewhere else then banks. You may end up cut off from your own money because your bank simply doesn't have it.